March 27 (Bloomberg) -- U.S. and European stocks retreated, trimming a third-straight weekly advance for both markets, after lower oil and metal prices dragged down commodity producers and the U.K. economy contracted more than previously estimated.
Exxon Mobil Corp. and Halliburton Co. lost more than 2 percent as Goldman Sachs Group Inc. said weakened demand may limit the rally in oil. Citigroup Inc. and JPMorgan Chase & Co. dropped at least 4 percent on a proposal from Congress to shift more repayment risks on exotic mortgages to lenders. Air France- KLM Group slumped as Europe’s biggest airline said the recession will push it to a loss for the year.
The Standard & Poor’s 500 Index lost 1.5 percent to 820.69 at 11:01 a.m. in New York. The gauge is up 12 percent in March, poised for its best month since 1987. The Dow Jones Industrial Average decreased 125.37, or 1.6 percent, to 7,799.19. The Nasdaq Composite Index retreated 1.6 percent to 1,561.04.
“There are still plenty of headwinds out there to concern equity investors,” said Michael Koskuba, a New York-based fund manager at Victory Capital Management Inc., which oversees $50 billion. “Given the sharp rally we’ve seen, it makes sense for the market to sell off a bit.”
The S&P 500 has surged 21 percent from a 12-year low on March 9 amid speculation Treasury Secretary Timothy Geithner’s plan to help investors buy toxic assets will revive credit markets. Stocks rallied yesterday as earnings at Best Buy Co. and ConAgra Foods Inc. beat analysts’ estimates.
‘Predatory’ Lending
Europe’s Dow Jones Stoxx 600 Index slipped 1.5 percent. The MSCI Asia Pacific Index was little changed after paring gains that drove valuations to the highest levels since December.
The S&P 500 Financials Index retreated 2.6 percent as Democrats in the U.S. House of Representatives recommended legislation to curb “predatory” lending and encourage the use of traditional 30-year, fixed-rate loans.
The new rules would prohibit banks from “directly or indirectly” hedging or transferring a minimum retained credit risk on most nontraditional mortgages, including some loans that have adjustable interest rates or require little documentation of a borrower’s income.
Citigroup slumped 7.5 percent to $2.60. JPMorgan declined 4.2 percent to $27.88.
“Whilst we have had a great deal of bad news on banks, we think there is still more to come,” said Goldman Sachs Group Inc. strategist Abby Joseph Cohen in a Bloomberg Radio interview from New York. “We’re certainly not yet in the clear -- whether in the U.S. or around the world.”
White House Meeting
President Barack Obama will seek support today from executives of the nation’s largest banks for his plan to stabilize the financial system. The meeting at noon Washington time is scheduled to include chief executive officers Vikram Pandit of Citigroup, JPMorgan Chase & Co.’s Jamie Dimon and Lloyd Blankfein of Goldman Sachs Group Inc.
Exxon, the world’s biggest oil producer, dropped 2.4 percent to $69.48. Halliburton fell 4.4 percent to $16.51.
Crude oil declined as much as 4.7 percent to $51.77 a barrel on the New York Mercantile Exchange, paring its sixth weekly increase.
Intel Corp. fell 2.9 percent to $15.36. The world’s largest computer-chip maker said it may offer shares “from time to time in connection with future acquisitions of other businesses, assets or securities.” Selling more shares dilutes the stake of existing shareholders.
Air France-KLM dropped 7.9 percent to 6.57 euros. Traffic has suffered a sustained decline this year and the first few weeks of March, usually one of the strongest periods, showed a further drop, Chief Executive Officer Pierre-Henri Gourgeon said.
Accenture Forecast
Accenture Ltd., the second-biggest technology-consulting firm, tumbled 13 percent to $27.66 after cutting its profit and sales forecasts as the worsening economy curbed spending on computer equipment. Revenue will rise 4 percent at most this year, down from a December forecast of as much as 10 percent, the company said.
Barclays Plc rallied 13 percent to 157.9 pence. After stress tests from the U.K.’s financial regulator, Britain’s third-largest bank said expects its capital position and resources to keep meeting requirements.
General Motors Corp. jumped 11 percent to $3.77. The biggest U.S. automaker has hired Commerzbank AG to find an investor for its Opel unit in Europe, two people familiar with the matter said.
The company might sell a stake in Opel as part of the automaker’s effort to raise as much as 3.3 billion euros ($4.5 billion) in Europe, said one of the people, who declined to be identified because details of the plan aren’t public. Spokesmen for Commerzbank and GM declined to comment.
Spending Increase
Spending by U.S. consumers in February rose for a second month, mainly reflecting an increase in prices that eroded buying power. The 0.2 percent gain in purchases followed a 1 percent increase in January that was larger than previously estimated, the Commerce Department said. Incomes decreased more than forecast, the report also showed.
Traders betting against Citigroup as part of an arbitrage with its preferred shares helped boost New York Stock Exchange short interest to the highest level in six months -- just as the bank gained 87 percent.
Citigroup shares borrowed and sold short soared almost fivefold to 999 million between Feb. 27 and March 13, according to data compiled by the exchange. Total short interest for all companies jumped to 16.1 billion, NYSE Euronext said. That’s the most since Sept. 15, the day Lehman Brothers Holdings Inc. filed for bankruptcy.
The S&P 500 is still down 9.5 percent this year after tumbling 38 percent in 2008, its worst annual return since the Great Depression. The MSCI World has dropped 10 percent in 2009 after last year’s 42 percent plunge, the biggest since the index was created in 1970.
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