U.S. Stocks Drop on Concern Over Bank Losses; Wells Fargo Falls

U.S. Stocks Drop on Concern Over Bank Losses; Wells Fargo Falls

Feb. 13 (Bloomberg) -- U.S. stocks fell, extending the market’s weekly retreat, after Wells Fargo & Co. said its fourth quarter loss was wider than first reported and a British bank increased provisions for bad loans.

Wells Fargo, the second-biggest U.S. home lender, dropped 6.2 percent after revising results because of additional costs tied to securities holdings. Bank of America Corp. and JPMorgan Chase & Co. retreated more than 5.1 percent after Lloyds Banking Group Plc said it expects HBOS Plc, the U.K. lender it took over last month, to report a bigger-than-expected 2008 loss. Benchmark indexes fluctuated earlier as gains in technology and energy shares offset the drop in banks.

The Standard & Poor’s 500 Index decreased 1 percent to 826.83, with all 10 industry groups posting declines. The Dow Jones Industrial Average fell 82.35 points, or 1 percent, to 7,850.41. The Russell 2000 Index of small companies slipped 0.5 percent.

“A few months ago I would tell people Wells Fargo and U.S. Bancorp are doing very, very good -- I can’t say that anymore,” Louis Navellier, who manages about $4 billion as chief executive officer of Navellier & Associates in Reno, Nevada, told Bloomberg Television. “When you have increasing loan-loss reserves, you just can’t lend as much. That’s why it’s so important for Treasury Secretary Geithner to take some of the bad assets off the books.”

The S&P 500 fell 4.8 percent over the past five days, its fifth weekly retreat in the past six weeks, amid growing skepticism that government efforts will succeed in shoring up a global financial system battered by more than $1 trillion in credit losses.

‘Strong Actions’

Stocks remained lower even after the U.S. House of Representatives passed President Barack Obama’s $787 billion economic stimulus plan designed to help repair the economy through tax cuts and a half-trillion dollars in federal spending.

Wells Fargo fell $1.04 to $15.76. The bank recorded a pretax charge of $328.4 million that increased its fourth-quarter loss to $2.73 billion, or 84 cents a share, from the $2.55 billion, or 79 cents, it reported last month. DBRS Inc. analyst William Schwartz said the announcement probably reflects a debt downgrade of a bank in which Wells Fargo invests.

JPMorgan retreated $1.50, or 5.7 percent, to $24.69 and Bank of America lost 30 cents, or 5.1 percent, to $5.57.

“Any incremental surprises on the financial side certainly are not welcome,” said Walter Todd, a portfolio manager at Greenwood Capital, which manages $600 million in Greenwood, South Carolina. “The situation with financials has to get resolved for us to have a sustainable move higher.”