Aug. 21 (Bloomberg) -- U.S. stocks dropped, extending the first weekly loss in a month, as investors speculated credit writedowns at financial firms will increase and a rise in oil damped earnings prospects for automakers and airlines.
Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. led financial shares in the Standard & Poor's 500 Index to a one-month low after Citigroup Inc. cut their profit estimates. General Motors Corp. fell as much as 3.4 percent and US Airways Group Inc. plunged 8.1 percent as oil posted the first three-day advance in more than a month. Supervalu Inc. and Safeway Inc. slipped more than 2 percent on speculation inflation will cut into supermarkets' profits.
The S&P 500 slumped 2.65, or 0.2 percent, to 1,271.89 at 10:20 a.m. in New York. The Dow Jones Industrial Average lost 28.66, or 0.3 percent, to 11,388.77, and the Nasdaq Composite Index decreased 9.88, or 0.4 percent, to 2,379.20. Three stocks fell for every two that rose on the New York Stock Exchange.
``In the financial situation overall, there are still more hurdles,'' Kurt Brunner, a Philadelphia-based money manager who helps oversee about $1.5 billion at Swarthmore Group Inc., told Bloomberg Radio. ``It's still muddy out there, and it goes across the financial spectrum.''
The S&P 500 has dropped 13 percent this year as the worst U.S. housing slump since the Great Depression slowed consumer spending and spurred turmoil in mortgage markets that saddled banks with more than $500 billion of losses. Earnings at financial companies in the S&P 500 declined 91 percent last quarter, according to Bloomberg data.
Hard-to-Sell Assets
Goldman Sachs, Morgan Stanley and Lehman will write down a combined $6.4 billion during the third quarter, Citigroup analyst Prashant Bhatia wrote in a report today.
Lehman may post a third-quarter per-share loss of $3.25, wider than the 41-cent loss Bhatia had predicted earlier. Lehman's so-called hard-to-sell assets are the highest, at $75.6 billion, followed by Goldman, at $45.2 billion, he said. The hard-to-sell assets include commercial real estate, residential mortgages and leveraged loans.
Goldman fell $1.28 to $156.91, Morgan Stanley retreated 47 cents to $36.93 and Lehman slumped 52 cents to $13.21.
`Treading Carefully'
Financial shares in the S&P 500 lost 1.4 percent, the most among 10 industries, as the cost of protecting bank debt from default rose to a five-week high. Concern grew after the Financial Times reported Lehman failed to sell a 50 percent stake to Korea Development Bank and China's Citic Securities Co. They walked away after deciding Lehman demanded too high a price, the FT said, citing people familiar with the Asian lenders.
``Smart investors are treading carefully,'' said Chirin Gill, a London-based fund manager at Daiwa SB Investments, which oversees about $60 billion. ``Investors are confused about the outlook for the economy over the next few months.''
An advance in financial shares yesterday helped snap a two- day, 2.4 percent slide in the S&P 500, its worst retreat in a month. Concern funding shortages at Fannie Mae and Freddie Mac will add to banks' $500 billion in credit losses sent financial shares down 6.3 percent during the week's first two days.
GM, the largest U.S. automaker, dropped 23 cents to $9.93 and US Airways fell 61 cents to $6.90 as oil rose. Crude gained on speculation Russian crude may be disrupted because of rising tensions with the U.S., and as the weaker dollar bolstered the hedging appeal of commodities. Oil added 3 percent to $119.05 a barrel.
Supervalu, the second-largest U.S. supermarket chain, slumped 87 cents to $25.30. Safeway, the No. 3, lost 60 cents to $25.92. UBS AG said inflation will reduce industry earnings.
Salesforce.com Inc. dropped $9.79 to $55.51 after revenue growth slowed and the company said acquisition costs will trim profit.
JDS Uniphase Corp. slumped $1.57 to $10.33, the lowest price since February. The maker of phone equipment for AT&T Inc. posted an unexpected net loss after sales of products that test networks declined.
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