Jan. 22 (Bloomberg) -- U.S. stocks slid, erasing about half of yesterday’s rally, as companies from Microsoft Corp. to EBay Inc. reported disappointing earnings and data on housing starts and jobless claims signaled the recession is deepening.
Microsoft slumped 8.3 percent after saying it’s no longer able to give sales and earnings forecasts for the rest of its fiscal year as the economic slowdown crimps demand for software. EBay sank 12 percent as fourth-quarter profit fell 31 percent and forecasts missed analysts’ estimates. All 10 industry groups in the Standard & Poor’s 500 Index retreated after initial claims for unemployment benefits matched a 26-year high and housing starts slumped to a record low.
The S&P 500 fell 1.9 percent to 824.31 at 10 a.m. in New York. The Dow Jones Industrial Average lost 140.98, or 1.7 percent, to 8,087.12. The Russell 2000 Index decreased 2.5 percent.
“Just about everybody is saying, ‘I just don’t know about the future,’” said Ralph Shive, the South Bend, Indiana-based manager of the $800 million Wasatch 1st Source Income Equity Fund, which has beaten 99 percent of rivals over the past five years. Microsoft’s inability to forecast results is “confirmation the recession is bigger, broader and worse than a normal recession.”
The S&P 500 is down 8.7 percent this year after analysts cut earnings estimates by a record 83 percentage points. The index surged the most since Dec. 16 yesterday as President Barack Obama’s plan to shore up lenders and Bank of America share purchases by company executives sent financial equities to their biggest rally in two months.
Europe’s Dow Jones Stoxx 600 Index slipped 0.5 percent. The MSCI Asia Pacific Index rose 0.3 percent.
Profit Slump
U.S. analysts now forecast a 28 percent drop in profits for the fourth quarter after saying in March 2008 that earnings would rise as much as 55 percent. Nine of 10 industries in the S&P 500 may show lower fourth-quarter profits, the broadest slump since Bloomberg began compiling the data in 1998. The biggest losses may come from metal processors, financial institutions and companies reliant on consumer spending.
Microsoft lost $1.61 to $17.77. The world’s biggest software maker also said it will eliminate 5,000 jobs as it cuts costs to match a slump in demand. Second-quarter net income was $4.17 billion, or 47 cents a share, compared with $4.71 billion, or 50 cents, a year earlier. Sales were $16.6 billion in the period. Analysts predicted profit of 50 cents a share and sales of $17.1 billion, according to a Bloomberg survey.
EBay, Motorola
EBay retreated $1.58 to $11.70. The world’s largest Internet auctioneer expects to earn as much as 34 cents a share in the first quarter, excluding some items. That trailed the 39- cent average estimate from analysts in a Bloomberg survey.
Motorola, the second-biggest U.S. seller of mobile phones, fell 19 cents, or 4.2 percent, to $4.32 after larger rival Nokia Oyj forecast a 10 percent slide in industry sales.
Apple Inc. rallied 5.5 percent to $88.28. The maker of iPhones, Macintosh computers and iPod players reported first- quarter sales and profit that topped analysts’ estimates late yesterday.
Citigroup Inc. lost 14 percent to $3.18 after rallying 31 percent yesterday. The bank that received $45 billion in U.S. government funds named former Time Warner Inc. Chief Executive Officer Richard Parsons to head its board of directors, replacing Chairman Win Bischoff after posting a record $18.7 billion net loss last year.
Bank of America Corp. fell 8.2 percent to $6.13.
JPMorgan Chase & Co. rose 1.3 percent to $22.92. After the market closed yesterday, Chief Executive Officer Jamie Dimon disclosed that he bought $11.5 million of JPMorgan stock last week.
Obama’s nominee for Treasury secretary, Timothy Geithner, pledged an expanded and prolonged government role in everything from stabilizing banks to ensuring credit for small businesses.
Geithner, who today may take a step toward confirmation with a Senate Finance Committee vote, told lawmakers yesterday “we’re at the beginning of this process of repairing the system, not close to the end.” He committed to “much more substantial action” on a “very dramatic scale.”
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