U.S. Stocks Fluctuate as Energy Gains Offset Jobs, Factory Data

By Lynn Thomasson

Sept. 2 (Bloomberg) -- U.S. stocks fluctuated as gains in energy shares offset a slump in consumer companies following data showing bigger-than-estimated job cuts and slower-than- forecast growth in factory orders.

ConocoPhillips and Devon Energy Corp. led energy stocks higher as oil climbed. Brown-Forman Corp. jumped 5.5 percent after the maker of Jack Daniel’s whiskey reported first-quarter earnings that rose more than analysts estimated. Bank of America Corp., General Electric Co. and McDonald’s Corp. dropped as ADP Employer Services said employers cut 298,000 jobs last month.

The Standard & Poor’s 500 Index decreased 0.1 percent to 997.36 at 11:16 a.m. in New York. The Dow Jones Industrial Average added 2.57, or less than 0.1 percent, to 9,313.17. The MSCI World Index of 23 developed countries slid 0.6 percent.

“Everything is not rosy right now,” said Jason Cooper, who manages $2.5 billion at 1st Source Investment Advisors in South Bend, Indiana. “Given the gains we’ve had in the past few months, people are skittish about whether it’s sustainable.”

Asia’s regional benchmark tumbled the most in two weeks and European shares extended declines after the employment report.

Speculation that banks have risen too far, too fast and will likely post more losses amid a weakening commercial real estate market pushed U.S. stocks lower yesterday. Banks, brokerages, insurers and asset managers in the S&P 500 have collectively slumped 6 percent so far this week, trimming a 128 percent surge since the group’s low on March 6.

The S&P 500, which has jumped 48 percent from a 12-year low six months ago, was valued at about 19 times the profits of its companies at the end of last week, the highest ratio since June 2004, according to weekly data compiled by Bloomberg.

‘Time for a Breather’

“After the strong rally it’s time for a breather,” said Sandro Rosa, an equity strategist at Clariden Leu AG in Zurich, which manages about $88 billion. “People are nervous and want to feather their nests. The earnings season is over and a new driver is missing. Valuations are no longer a screaming buy and earnings will have to rise to justify the prices.”

Energy producers in the S&P 500 collectively added 0.5 percent, the most among the 10 main industries, as oil prices increased following a government report that showed U.S. gasoline supplies declined the most since May as consumption increased.

U.S. Stocks Fall After China's Drop

U.S. investors shied from risk Monday, unloading stocks and oil following a big stock-market selloff in China.

The Dow Jones Industrial Average was recently down 82 points at 9462.20, hurt in part by a 1.6% decline in component Chevron. Aluminum maker Alcoa was also weak, off 2.9%.

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The Nasdaq Composite Index was down 1.1%. The S&P 500 was off 1%. All its sectors traded lower, led by declines of nearly 2% each in energy and basic materials.

Crude-oil futures were recently down $3 to $69.73 a barrel at the New York Mercantile Exchange.

China's benchmark stock index, the Shanghai Composite, fell 6.7% to 2667.75, its lowest finish since May. It has given back nearly a quarter of its value since it peaked on Aug 4.

The latest round of China jitters comes at a time when many traders think that speculation had pushed oil's price ahead of what might be justified by supply and demand. Hopes in China's ability to provide new demand for oil to run factories, an expanding fleet of personal cars, and other machinery are fading.

"The energy markets have probably become the leading market for pricing in [an economic] recovery in China," said energy analyst John Kilduff, of MF Global. "Now it looks like we're likely to consolidate for awhile."

Oil prices traded between $70 and $75 last week, but now seem likely to break below that, perhaps as low as $66, Mr. Kilduff said.

Blue-chip industrial stocks were also big losers as traders fretted about China's economy. Caterpillar and Boeing each fell nearly 3%. United Technologies was down more than 1%.

Dow component Walt Disney also declined, falling 2.4% after announcing it would acquire Marvel Entertainment for about $4 billion. Marvel, which is not a Dow stock, soared 26% on the news.

Investors are increasingly hungry to see data showing actual improvement in the global economy, not just a slowing contraction. Those hopes will be tested again this week by a flurry of key releases, including a widely anticipated U.S. jobs data due Friday.

"The key thing right now is that the consumer probably isn't dead, but he is severely injured," said strategist Stephen P. Wood, of Russell Investments. "In that environment, the global economy is going to be growing at a much less brisk pace for some time."

Analysts expect that U.S. nonfarm payrolls shed 200,000 jobs in August. The unemployment rate is expected to tick up to 9.6%, compared to 9.4% in July.

The dollar rose against the euro but declined against the yen, which rose after a historic electoral victory by the upstart Democratic Party of Japan. Treasury prices were higher.

U.S. Stocks Join Global Selloff

An overseas selloff spilled into the U.S. stock market Monday as investors around the world fretted that a global economic rebound may be further off than previously thought.

In particular, fears that U.S. consumers will remain under heavy pressure for months to come have continued to reverberate since last week, when new economic data and retailers' earnings reports were generally glum.

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Markets in China, India, and other countries that rely heavily on the U.S. as an export market suffered big overnight losses, which continued after the opening bell in New York on Monday.

The Dow Jones Industrial Average was recently down 193.5 points, or 2.1%, at 9127.93, with all 30 of its blue-chip components trading lower. The Nasdaq Composite Index was down 2.6%. The S&P 500 was off 2.4%, hurt by declines in every sector.

The selloff underscores a notion that the U.S. consumer remains an important global engine of growth, even at a time when other countries are emerging as economic powers in their own right.

Monday's losses have also deepened some market veterans' conviction that a more lasting reversal is underway from the summer highs in major indexes.

"Everybody is talking about the current correction now, as if it's a foregone conclusion and we just have to see how far it goes," said Mike Farr, president of the Washington portfolio-management firm Farr, Miller & Washington,

Basic-materials stocks were also big losers in Monday's selloff, hurt by a pullback in commodity prices as traders bet on falling demand. Freeport McMoran Copper & Gold tumbled 6.5%, U.S. Steel was off 7.3%, and Dow Chemical was off nearly 5%.

The broad Dow Jones-UBS Commodity Index was down 5.9%. In part, it was hurt by a $1.65 slide in oil futures to $65.86 a barrel in New York.

China's Shanghai Composite Index posted its biggest percentage decline since November, falling 5.8% to end below 3,000 since June. Metals stocks were hit hardest, with Angang Steel and Yunnan Copper dropping by the 10% limit in Shenzhen, while Aluminum Corp. of China and Jiangxi Copper dropped by as much in Shanghai.

Japan's Nikkei Stock Average fell 3.1%. Data showing Japan's second-quarter gross domestic product registered its first quarterly growth in five quarters did little for the Tokyo markets. GDP grew 0.9% from the previous quarter, short of the 1% rise expected in a Dow Jones Newswires poll of economists.

The selloff rippled into Europe, were major stock benchmarks were weaker in recent activity. The U.K.'s FTSE 100 and Germany's DAX index were down by about 2%.

More disappointing reports on the consumer were out Monday after home-improvement retailer Lowe's reported a 19% decline in second-quarter earnings, missing Wall Street expectations. Its shares sank 9.3%.

Home Depot, a Lowe's rival and component of the Dow industrials, declined nearly 4.3%. It reports earnings later this week.

"The consumer confidence and retail issues are huge in the U.S. and markets are very worried about it," said David Buik, senior partner at BCG Partners in London.

Data on other areas of the economy showed some improvement. The New York Federal Reserve said its Empire State index of manufacturing conditions rose to 12.08 in August from -0.55 in July. The August reading was the report's highest level since November 2007.

Treasury prices rose as investors sought safe havens. The benchmark 10-year note rose 24/32 to yield 3.48%. Yields move inversely to prices. Three-month dollar Libor moved up to 0.43125% from Friday's 0.42938%, its first move up in 16 days. The three-month rate peaked at 4.81875% on Oct. 10.

U.S. Stocks Drop on Disappointing Consumer Confidence, Earnings

By Lynn Thomasson

July 28 (Bloomberg) -- U.S. stocks fell and the Standard & Poor’s 500 Index retreated from an eight-month high as consumer confidence trailed projections and companies from Office Depot Inc. to Coach Inc. posted worse-than-estimated results.

American Express Co. and Exxon Mobil Corp. helped lead the Dow Jones Industrial Average lower as the Conference Board report reinforced concern that higher unemployment will undermine consumer sentiment. Office Depot, the second-largest business-supply retailer, slid 18 percent and Coach, the biggest U.S. maker of luxury leather handbags, lost 1.3 percent. Losses were limited as technology and health-care stocks gained.

The S&P 500 slipped 0.3 percent to 979.63 at 4:04 p.m. in New York after a two-week rally left the index trading at 16.23 times its companies’ earnings from the past year, the most expensive valuation since September. The Dow lost 11.79 points, or 0.1 percent, to 9,096.72. Europe’s Dow Jones Stoxx 600 Index slumped 0.9 percent.

“My concern is that the valuations aren’t justified,” said Charles Knott, chief investment officer at Knott Capital Management in Exton, Pennsylvania, who oversees about $500 million. “The market has come a long way in the last month and while earnings have generally exceeded expectations, the expectations were probably set too low.”

While the S&P 500 is up 11 percent since July 10 after companies from Goldman Sachs Group Inc. to Mattel Inc. beat estimates, Bloomberg data shows per-share profits have dropped 27 percent on average for companies that reported since June 17. Companies have slashed costs by firing workers and reducing business expansion, leading them to beat analysts’ profit projections on a per-share basis by 9.9 percent while topping revenue expectations by only 0.2 percent.

Confidence Slumps

The Conference Board’s confidence index dropped to 46.6, a second consecutive decline, following a reading of 49.3 in June, a report from the New York-based group showed today. The figure reached a record low of 25.3 in February.

The government sold a record $42 billion of two-year notes, drawing a yield of 1.08 percent that was greater than the forecasted 1.058 percent compiled from a Bloomberg News survey of eight of the Federal Reserve’s primary dealers that bid on the securities. Yields on the benchmark 10-year note fell 0.03 percentage point to 3.69 percent, according to BGCantor Market Data.

Office Depot plunged 18 percent, the most since January, to $4.38 for the steepest loss in the S&P 500. The company reported a second-quarter loss excluding some items of 22 cents a share, while the average estimate of analysts was a loss of 12 cents.

Coach retreated 1.3 percent to $28.05. The retailer said fiscal fourth-quarter sales declined 0.5 percent to $777.7 million, missing analysts’ estimates, as mounting job losses and declining home values discourage shoppers from purchasing non- necessities.

U.S. Stocks Decline, Trimming S&P 500’s Best Quarter Since ‘03

June 30 (Bloomberg) -- U.S. stocks fell, limiting the biggest quarterly advance for the Standard & Poor’s 500 Index since 2003, after consumer confidence unexpectedly slid and delinquencies on the least-risky mortgages more than doubled.

Caterpillar Inc., Expedia Inc. and Starbucks Corp. lost more than 4.4 percent after the Conference Board’s sentiment index slumped to 49.3, six points below the average economist forecast. Citigroup Inc. and JPMorgan Chase & Co. dropped as government data showed prime mortgages 60 days or more past due climbed to 2.9 percent in the first quarter from 1.1 percent at the same time last year.

The S&P 500 lost 1.4 percent to 914.16 at 1:58 p.m. in New York, putting the index on track for the first monthly drop since February. The Dow Jones Industrial Average slid 121.98 points, or 1.4 percent, to 8,407.4. Stocks in Europe retreated, while Asian shares rallied.

“You had a great market run-up this quarter and people are starting to wonder what’s going to happen next,” said Jonathan Vyorst, senior vice president at New York-based Paradigm Capital Management Inc., which oversees about $1.5 billion. “The fundamentals of the economy aren’t really that strong.”

Even though the S&P 500 has gained almost 15 percent this quarter, the rally stalled in June amid concern share prices already reflect a economic recovery, leaving the index down 0.6 percent for the month. Investors are paying 14.5 times trailing 12-month profit for companies in the S&P 500, near the most- expensive level in seven months.

‘Wall of Worry’

The Chicago Board Options Exchange Volatility Index, or VIX, rose for the first time in six days, adding 6.9 percent to 27.09. The VIX yesterday dropped below its level when Lehman Brothers Holdings Inc. collapsed in September, yet was still 26 percent above its average.

Above-average volatility shows traders are still paying up for insurance to protect against losses in the S&P 500. Bigger equity gains depend on investors overcoming the remaining skepticism, sometimes called the “wall of worry,” spurred by last year’s 38 percent slump in the equity index, the steepest slide since 1937.

Caterpillar, the biggest maker of earth-moving equipment, dropped 4.8 percent to $33.06. Expedia, the Internet travel agency, tumbled 6.4 percent to $14.90. Starbucks slumped 4.4 percent to $13.99. Consumer confidence weakened as U.S. firms were slow to start hiring again and the wealth destruction caused by the housing slump forced Americans to rebuild savings.

Banks Slump

Citigroup fell 1.7 percent to $2.97. JPMorgan lost 1.9 percent to $33.93. Overall, mortgages 60 days or more past due rose 88 percent from last year, according to data from the Office of the Comptroller of the Currency and the Office of Thrift Supervision. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said.

Southern Co. sank 3 percent, the most in two months, to $30.90. The largest U.S. power producer was cut to “hold” from “buy” by Citigroup Inc. analysts.

“We’ve had a rally that lifted most boats, but I think the advance from here is going to be more selective,” said Alan Gayle, the Richmond, Virginia-based director of asset allocation at Ridgeworth Investments, which manages $60 billion. “As we get closer to the earnings season, investors are going to be looking carefully for companies with signs of sustainable growth.”

AIG Tumbles

American International Group Inc. posted the S&P 500’s steepest loss, plunging 13 percent to $1.16. The insurer bailed out by the U.S. said valuation declines on credit-default swaps sold to European banks could have a “material adverse effect” on the company’s results. The risk of losses on the derivatives may last “longer than anticipated,” AIG said yesterday in a regulatory filing.

Energy stocks lost 1.3 percent as a group as oil dropped below $70 a barrel on evidence the recession may be worsening around the world. Schlumberger Ltd., Tesoro Corp. and Hess Corp. retreated more than 2.2 percent.

The U.K. economy shrank the most since 1958, contracting 2.4 percent from the final three months of 2008, the Office for National Statistics said. Gross domestic product in Canada contracted for a ninth month, declining 0.1 percent in April, because of falling output in the retail, manufacturing and energy industries, according to data from Statistics Canada.

Benchmark indexes rose at the open following better-than- estimated results at Apollo Group Inc. and H&R Block Inc. and reports showing home prices fell less than forecast and two purchasing managers’ gauges topped economists’ estimates.

“My guess would be that home prices are going to level off -- they’re not going to keep falling,” Robert Shiller, an economist at Yale University and co-founder of the home price index that bears his name, told Bloomberg Television. Still, it’s “hard to predict” a speculative market, and “I am not optimistic that we’re going to see any sharp rebound.”

U.S. Stocks Fall as Banks Drop on Credit Downgrades, Oil Slips

June 17 (Bloomberg) -- U.S. stocks fell for a third day after Standard & Poor’s downgraded the credit ratings of 22 banks and a drop in oil prices dragged down energy shares.

Wells Fargo & Co., BB&T Corp. and Capital One Financial Corp. retreated at least 3.9 percent after S&P said operating conditions for banks will become “less favorable.” Exxon Mobil Corp. and Chevron Corp. slid as a bigger-than- estimated increase in gasoline supplies dragged crude below $70 a barrel. FedEx Corp. tumbled 2.8 percent after forecasting earnings that may be less than half analysts’ estimates.

The S&P 500 declined 0.7 percent to 905.27 at 10:39 a.m. in New York after the index sank 3.6 percent in the previous two days, its worst two-day slump since April. The Dow Jones Industrial Average lost 29.63 points, 0.4 percent, to 8,475.04.

While President Barack Obama said “you’re starting to see the engines of the economy turn,” in an interview with Bloomberg News, he also said a full recovery will “take a long time.” The jobless rate will continue to climb from its current 25-year high of 9.4 percent to 10 percent, he said.

Obama stressed the need for reforms, including overhauling the health-care system, to generate the growth needed to reduce the budget deficit. The president in January inherited the worst financial calamity since the 1930s as the collapse of the subprime-mortgage market spurred almost $1.5 trillion in losses and writedowns at banks worldwide.

Fed Bets

Equity futures rose before the start of trading on growing speculation the Federal Reserve will hold off raising interest rates. Fed officials are considering whether to use next week’s policy statement to suppress speculation they will lift borrowing costs as soon as this year. While policy makers have signaled they accept an increase in longer-term Treasury yields as the economy improves, some are concerned at premature expectations of rate rises.

The cost of living in the U.S. rose less than forecast in May, culminating in the biggest 12-month drop in prices in almost 60 years. The consumer price index increased 0.1 percent after no change a month earlier, the Labor Department said. In the 12 months ended in May, costs dropped 1.3 percent, the biggest decline since 1950.

FedEx Corp. fell 3 percent to $49.88 after citing an “extremely difficult” economy for a disappointing earnings forecast. Earnings for the period ending in August will be 30 to 45 cents a share, FedEx said today, compared the 70-cent average of 11 estimates compiled by Bloomberg. The company didn’t provide a full-year outlook.

‘Raising Questions’

“Transportation is a good leading indicator for the economy because it gives us a sense of the level of orders that were just placed,” said Diane Garnick, who helps oversee $391.3 billion as investment strategist at Invesco Ltd. in New York. “If transportation continues to be as negative as it is now, valuations in the equity market might be looking pricier.”

U.S. Stocks Drop on Concern Over Job Losses

U.S. Stocks Drop on Concern Over Job Losses, Earnings Valuation

June 3 (Bloomberg) -- U.S. stocks fell for the first time in five days, extending a worldwide slump, as a report showed employers cut more jobs than forecast and the Standard & Poor’s 500 Index traded at the most expensive in eight months.

Aetna Inc., the third-largest U.S. health insurer, dropped 7 percent on a reduced 2009 earnings outlook. Valero Energy Corp. tumbled 17 percent after forecasting a second-quarter loss and saying it will sell shares. Russia’s benchmark equity index slid 7.6 percent to lead a decline in global equities after the MSCI World Index’s valuation reached a five-year high. Oil fell, while Treasuries and the dollar rose.

The S&P 500, which closed at a seven-month high yesterday, dropped 1.2 percent to 933.75 at 11:27 a.m. in New York. The Dow Jones Industrial Average fell 68.81 points, or 0.8 percent, to 8,672.06. Yesterday, the Dow briefly erased its 2009 loss for the first time since January.

“We’ve had a very strong move in a very short period of time and the economy certainly isn’t green-shooting in a way that justifies a lot of optimism,” said Michael Holland, chairman of New York-based Holland & Co. LLC, which oversees about $4 billion.

The S&P 500 was priced at 15.5 times the earnings of its companies at the start of trading today, the most expensive level since October, after rising for three straight months. Still, that’s lower than the average 19.8 monthly valuation over the past decade.

Jobs Concern

Economic data today showing deeper U.S. job losses and a worse-than-estimated contraction in service industries dragged stock indexes lower. Companies in the U.S. cut an estimated 532,000 workers in May, according to a private report. A government release showed factory orders grew less than expected, while the Institute for Supply Management said its index of service industries was 44 last month, missing economists’ estimates.

The Labor Department’s monthly jobs report, scheduled for June 5, may show payrolls at companies and government agencies shrank by 520,000 in May and unemployment rose to a 25-year high of 9.2 percent, based on a Bloomberg survey of economists.

All 10 industries in the S&P 500 retreated as Federal Reserve Chairman Ben S. Bernanke told lawmakers that large U.S. budget deficits threaten financial stability and the government can’t continue indefinitely to borrow at the current rate to finance the shortfall.

‘Fiscal Balance’

“Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” Bernanke said. “Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance.”

Aetna slumped 7 percent to $25.35. High medical costs for enrolled health plan subscribers forced the insurer to reduce its 2009 earnings forecast for operating profit to a range of $3.55 a share to $3.70 a share, from an earlier projected range of $3.85 to $3.95 a share, according to a company statement..

Valero fell the most in the S&P 500, dropping 17 percent to $18.64. The largest U.S. refiner said it expects a second- quarter net loss of 50 cents a share and it plans to sell 40 million shares.

Halliburton Co., Sunoco Inc. and Marathon Oil Corp. slid more than 4.4 percent as oil declined for a second day, losing as much as 3 percent to $66.52 a barrel on the New York Mercantile Exchange. A group of S&P 500 pipeline builders, oil drillers and exploration companies slumped 2.8 percent for the steepest drop among the 10 industries in the S&P 500.

Risks ‘Quite Symmetrical’

“The downside and upside risks to equities are now quite symmetrical,” Andrew Garthwaite, an equity strategist for Credit Suisse Group, wrote in a report. He downgraded his stance on U.S. stocks to “market weight” from “overweight” on concern companies are issuing too many shares and the economy may remain weak.

Dish Network Corp., the second-largest U.S. satellite- television provider, retreated 8 percent to $15.86. A judge told the company and EchoStar Corp. to pay TiVo Inc. $192.7 million in damages and interest because their software infringes a patent and to cease selling the service to customers. TiVo surged 46 percent, the biggest gain in four years, to $10.20.

NYSE Euronext Chief Executive Officer Duncan Niederauer said he’s “a lot more confident” the three-month rally in equities is sustainable as trading volume increases. Trading volume in April and May was “quite steady, quite good,” he told Bloomberg News in an interview from Amsterdam.

The S&P 500 has surged 38 percent from a 12-year low on March 9 as the biggest U.S. banks said they were profitable last quarter, President Barack Obama outlined a $787 billion plan to revive the economy and the Treasury unveiled plans to finance as much as $1 trillion in purchases of lenders’ troubled assets.

Treasuries, Dollar Gain

Treasuries rose for a second day, pushing yield on 10-year note down three basis points, or 0.03 percentage point, to 3.58 percent. The dollar rose versus the euro for the first time in five days.

Bill Gross, founder of Pacific Investment Management Co., advised holders of U.S. dollars to diversify before central banks and sovereign wealth funds ultimately do the same amid concern about surging deficits.

The U.S.’s “fortune-producing capabilities seem to be declining, which might suggest that its relative standard of living is doing so as well,” Gross wrote in his June investment outlook posted today on the Newport Beach, California-based firm’s Web site. “If so, the implications are serious.”

Confidence Data Bolster U.S. Stocks

GEOFFREY ROGOW

U.S. stocks surged, with the Dow Jones Industrial Average up more than 100 points, after a jump in consumer confidence offset a weak report on housing prices.

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In a morning report, the Conference Board said its index of consumer confidence for May jumped to 54.9 from 40.8 in April, which was originally reported as 39.2. The index is now at its highest since September 2008, the board said. The present situation index, a gauge of consumers' assessment of current economic conditions, edged up to 28.9 from 25.5 in April. Expectations for economic activity over the next six months jumped to 72.3 from 51.0 in the prior month.

Consumer-discretionary stocks jumped on the news. Home Depot shares were up more than 3%, leading the Dow industrials.

The confidence report offset a discouraging set of numbers on home prices as the S&P Case-Shiller home-price indexes showed prices continued to tumble in March, as 15 of 20 major metropolitan areas showed price declines of more than 10% from a year earlier. In the first quarter, the S&P/Case-Shiller U.S. National Home Price Index dropped 19.1% from a year earlier, the biggest quarterly decline for the reading's 21-year history.

"The market already knows about the problems out there and is simply trying to evaluate where we are in the curve," said Daniel Morgan, a portfolio manager with Synovus Securities.

Recently, the Dow Jones Industrial Average was higher by 170 points at 8448. The S&P 500-stock index gained about 2% and the Nasdaq Composite Index was up by about 2.7%.

Technology companies have rallied since the open, with Research In Motion up 3%, and Apple up 5%.

U.S. Stocks Retreat

U.S. Stocks Retreat From Four-Month High on Earnings Valuations

May 11 (Bloomberg) -- U.S. stocks fell from a four-month high after the Standard & Poor’s 500 Index traded at the most expensive level in seven months and banks said they will sell more shares. Europe’s benchmark index also dropped, while Treasuries advanced.

Capital One Financial Corp., U.S. Bancorp and BB&T Corp. tumbled more than 7.5 percent on plans to sell shares to repay government bailout funds. American Express Co. and JPMorgan Chase & Co. slid at least 8 percent following a 23 percent surge in a measure of financial stocks last week. General Motors Corp. dropped 11 percent after saying bankruptcy is more probable than previously thought.

The S&P 500 lost 2.2 percent to 909.24 at 4:07 p.m. in New York after advancing for eight out of the past nine weeks. The Dow Jones Industrial Average declined 155.88 points, or 1.8 percent, to 8,418.77. Almost five stocks fell for each that rose on the New York Stock Exchange, the broadest sell-off in three weeks. Europe’s Dow Jones Stoxx 600 Index slid 1.4 percent.

“The market has gone too far, too fast,” Douglas Cliggott, the Greenwich, Connecticut-based manager of the $81 million Dover Long/Short Sector Fund, which beat 97 percent of its peers last year, told Bloomberg Radio. “There is a risk that the market will give quite a bit of the move back.”

The S&P 500 last week rose 5.9 percent, erasing this year’s losses, after results from the government’s examination of banks reassured investors and the Labor Department said the pace of job cuts slowed in April. The measure’s 37 percent jump from March 9 through May 8 is the most over similar spans since the 1930s.

Earnings Watch

The S&P 500 ended last week trading at 15.1 times its members’ reported earnings, according to Bloomberg data, the highest valuation since October.

The biggest earnings-season rally since 2002 has pushed 34 percent of the companies in the S&P 500 above analysts’ price targets for the next year, raising concerns about the pace of the recovery. The benchmark index for U.S. equities is within 5 percent of the combined price projections of more than 1,700 securities analysts after gaining 14 percent since Alcoa Inc. reported first-quarter results on April 7.

Earnings for S&P 500 companies will slide 35 percent this quarter and 23 percent in the July-to-September period, according to analyst estimates compiled by Bloomberg.

Options traders are increasing bets that the rally is about to end. Futures on the Chicago Board Options Exchange Volatility Index, which measures the cost of buying or selling options as insurance against declines in the S&P 500, are priced mostly above the gauge’s level of 32.93. The premium on VIX contracts expiring this month through November indicates traders are betting the stock index will fall in the next six months.

American Express Drops

American Express, the nation’s largest credit-card company by purchases, fell 8.3 percent to $26.04. JPMorgan Chase & Co., which passed stress tests without needing fresh capital, sank 8 percent to $35.83.

HSBC Holdings Plc, Europe’s biggest bank, said 2009 will be a “tough” year as bad loans increase and the economy deteriorates. Charges for impaired loans rose in all customer groups and regions during the first quarter, the London-based lender said.

Capital One lost 14 percent to $27.10. U.S. Bancorp slipped 9.9 percent to $18.50. BB&T, which cut its dividend today, slid 7.6 percent to $24.34. Banks that accepted bailout money from the Troubled Asset Relief Program are subject to government oversight and restrictions on compensation that they say put them at a disadvantage to competitors.

‘Take a Breather’

“The relief over the stress tests drove markets and improved sentiment last week,” said Thomas Schudel, a fund manager at Clariden Leu in Zurich, which oversees about $88 billion. “We could see the market take a breather today.”

U.S. Stocks Advance as S&P 500 Index Erases Decline for Year

U.S. Stocks Advance as S&P 500 Index Erases Decline for Year

May 4 (Bloomberg) -- U.S. stocks rose, erasing the Standard & Poor’s 500 Index’s 2009 loss, after home sales beat estimates and manufacturing in China increased for the first time in nine months, boosting confidence the global recession is easing.

Financial stocks rallied after a Goldman Sachs Group Inc. strategist boosted his rating on the industry, while Wells Fargo & Co. added 23 percent as Warren Buffett called it a “fabulous” bank. Alcoa Inc. and Freeport-McMoRan Copper & Gold Inc. gained more than 6.9 percent amid climbing metals prices. Lennar Corp. surged 9.3 percent, helping lift a measure of homebuilders in S&P indexes by 9.2 percent.

“It’s like a snowball,” said Walter “Bucky” Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. “It’s building with every favorable economic report that we get. That’s getting money coming out of cash and into riskier assets.”

The S&P 500 rose 3.4 percent to a four-month high of 907.24 at 4 p.m. in New York. The index never rose in 2008, a year in which it plunged 38 percent for the worst performance since 1937. The Dow Jones Industrial Average increased 214.33 points, or 2.6 percent, to 8,426.74. The MSCI World Index of 23 developed markets gained 3 percent, also erasing its year-to- date retreat.

Stocks have soared since March 9, with the S&P 500 advancing 34 percent, as investors speculated U.S. Treasury Secretary Timothy Geithner’s plan to finance the purchase of as much as $1 trillion in illiquid assets from banks will help end the recession. Equities have also been propelled higher by companies exceeding first-quarter profit estimates. More than two-thirds of the S&P 500 companies that have reported beat analysts’ earnings projections.

U.S. Stocks Retreat, Led by Banks on Balance-Sheet Concern

U.S. Stocks Retreat, Led by Banks on Balance-Sheet Concern

April 28 (Bloomberg) -- U.S. stocks retreated for a second day as concern that banks need more capital and the swine-flu outbreak will thwart an economic recovery offset a bigger-than- expected jump in consumer confidence.

Bank of America Corp. and Citigroup Inc. slumped at least 5.9 percent on a Wall Street Journal report that government stress tests may show the lenders need more cash to shore up balance sheets. Delta Air Lines Inc., the largest airline, slid 9.9 percent on concern swine flu will reduce travel. General Motors Corp. tumbled 11 percent as bondholders said a plan to exchange $27 billion in debt for equity is unreasonable.

The Standard & Poor’s 500 Index lost 0.3 percent to 855.16. The Dow Jones Industrial Average slipped 8.05 points, or 0.1 percent, to 8,016.95. The Russell 2000 Index of small companies added 0.7 percent.

“There’s ongoing uncertainty about the health of the banking system,” said Joseph Keating, who manages $3 billion as chief investment officer at RBC Bank, a unit of Royal Bank of Canada, in Birmingham, Alabama. “It’s unsettling. And then you lay that on top of the swine flu and what that means for economic activity.”

Benchmark indexes fluctuated throughout the day as the decline in banks was offset by gains in consumer shares after the Conference Board’s confidence index climbed the most since November 2005.

The S&P 500 has rallied 26 percent since March 9 as companies from American Express Co. to Ford Motor Co. posted better-than-estimated earnings and investors speculated U.S. Treasury Secretary Timothy Geithner’s plan to finance the purchase of as much as $1 trillion in illiquid assets from banks will help to pull the global economy out of a recession.

Earnings Watch

While 68 percent of the S&P 500 companies that reported first-quarter results have beaten estimates, analysts predict profits will decline through September, dropping 34 percent in the first quarter and 33 percent in the second.

Bank of America slid 77 cents to $8.15, while Citigroup fell 18 cents to $2.89. The two banks plan to mount rebuttals to the Federal Reserve’s preliminary report following the tests conducted on 19 financial companies, the Journal said.

Bank of America spokesman Robert Stickler declined to comment on the report, saying the process allows banks to respond to the government’s comments. Citigroup spokesman Jon Diat also declined to comment on the stress test and said the bank’s capital base is “strong.”

Financials Slump

Bank of America needs $60 billion to $70 billion of capital, according to Freidman, Billings, Ramsey Group Inc. analyst Paul Miller, who cited stress tests performed by his firm. The Charlotte, North Carolina-based lender and New York- based Citigroup already have received a combined $90 billion in U.S. bailout funds.

The S&P 500 Financials Index slumped 1.8 percent for the steepest decline among 10 industries, trimming its rebound since March 6 to 71 percent.

GM, the largest U.S. automaker, tumbled 23 cents to $1.81 for the steepest drop in the Dow after bondholders said they find the automaker’s offer to exchange their $27 billion in debt for equity unreasonable and said they should be treated more equitably with labor unions.

Airline shares fell for a third day on concern that the swine flu outbreak will crimp travel. Delta lost 67 cents to $6.08. UAL Corp., parent of United Airlines, the third-largest U.S. carrier, slid 8.2 percent to $5.05.

Swine Flu

The number of confirmed cases of swine flu in the U.S. jumped to 64 as global health officials monitored New York City as a second possible epicenter for the international outbreak.

As many as 152 people have died in Mexico with suspected swine flu. The virus has taken its biggest hold in four states in Mexico. The U.K., Israel, Canada, New Zealand and Spain have also confirmed cases. The World Health Organization said it’s watching New York to see whether the virus has become rooted in another country, a finding that would boost the agency’s pandemic alert system.

A gauge of retailers, restaurant chains, hotel companies and other so-called consumer discretionary stocks advanced as much as 1.7 percent to lead the market’s advance earlier, before paring its gain to 0.2 percent by the end of the day.

The Conference Board’s confidence index climbed to 39.2, the highest level since November, from 26.9 in March, the New York-based research group said today. The decline in home prices in 20 major U.S. cities slowed in February for the first time since 2007, indicating that the market may be stabilizing. The S&P/Case-Shiller index’s 18.6 percent drop compares with a record 19 percent decline the month before.

IBM Dividend, Buyback

International Business Machines Corp. added 2 percent to $101.94. The world’s biggest computer-services provider said it increased its dividend by 10 percent and boosted its stock buyback plan by $3 billion.

Office Depot Inc. climbed 11 percent to $2.82 for the second-biggest gain in the S&P 500. The world’s second-largest office-supplies retailer reported first-quarter earnings excluding some items of 10 cents a share, beating the average analyst estimate for a loss of 10 cents a share.

Southwestern Energy Co., the only energy company in the S&P 500 to rise last year, climbed 9.5 percent to $36.64 after reporting higher-than-estimated first-quarter profit. The stock led the S&P 500 Energy Index to a 0.5 percent advance.

Coventry Health Care Inc. added 7.1 percent to $15.22. The provider of medical benefit plans posted first-quarter earnings excluding some items of 30 cents a share, beating the average analyst estimate by 21 percent.

FPL Group Inc. gained 5.8 percent to $54.27. The largest U.S. producer of wind power said first-quarter profit rose 46 percent, beating analysts’ estimates, on increased capacity in North Dakota, Iowa and Texas and lower costs at the utility unit.

U.S. Stocks Gain on Earnings, Banks Fluctuate on Stress Tests

U.S. Stocks Gain on Earnings, Banks Fluctuate on Stress Tests

April 24 (Bloomberg) -- U.S. stocks rose for a second day as companies from Ford Motor Co. to Microsoft Corp. posted better-than-estimated results, while bank shares fluctuated as investors evaluated a Federal Reserve report on stress tests. Ford rallied 16 percent after slowing its consumption of cash. American Express Co. climbed 19 percent as the credit-card company said it plans to repay the government’s investment. Microsoft added 8.4 percent following its smaller-than-forecast profit decline and prediction of bigger cost savings. Schlumberger Ltd., the largest oilfield-services provider, jumped 5.7 percent after income fell less than estimated.

“We’ve driven down expectations so low that earnings across the board have been ahead of estimates,” said James Dunigan, managing executive of investments at PNC Wealth Management in Philadelphia, which oversees $96 billion. “That’s providing some catalyst for people to put together a story of where the economy is going to be in couple of months. We have seen the worst.”

The Standard & Poor’s 500 Index added 1.2 percent to 861.99 at 2:26 p.m. in New York, trimming losses at the end of its first weekly drop in almost two months. The Dow Jones Industrial Average rallied 95.81 points, 1.2 percent, to 8,052.87. The Russell 2000 Index increased 1.7 percent. About three stocks climbed for each that fell on the New York Stock Exchange.

The S&P 500 is still down 0.2 percent this week on renewed concern that banks may post more credit losses and as prices jumped during six weeks of gains. The U.S. benchmark index has rebounded 27 percent from a 12-year low on March 9 on speculation government efforts to fix the banking system and revive the economy will pull the nation out of a recession.

The Federal Reserve said the recession and market turbulence have “substantially reduced” reserves at some of the 19 largest U.S. banks, while most of the firms hold capital “well in excess” of regulatory standards.

“Losses associated with the deepening recession and financial market turmoil have substantially reduced the capital of some banks,” the Fed said today in a description of stress tests of the companies. “Most U.S. banking organizations currently have capital levels well in excess of the amounts required to be well capitalized.”

U.S. Stocks Gain on Earnings as Ford Motor, Microsoft Rally

U.S. Stocks Gain on Earnings as Ford Motor, Microsoft Rally

April 24 (Bloomberg) -- U.S. stocks rose, paring losses in the market’s first weekly drop in almost two months, after companies from Ford Motor Co. to American Express Co. and Microsoft Corp. reported better-than-estimated results.

Ford rallied 19 percent after slowing its consumption of cash. American Express climbed 11 percent as the credit-card company said it plans to repay the government’s investment. Microsoft added 4.1 percent following its smaller-than-forecast profit decline and prediction of bigger cost savings. Schlumberger Ltd., the largest oilfield-services provider, jumped 4.5 percent after profit fell less than estimated.

“We’ve driven down expectations so low that earnings across the board have been ahead of estimates,” said James Dunigan, managing executive of investments at PNC Wealth Management in Philadelphia, which oversees $96 billion. “That’s providing some catalyst for people to put together a story of where the economy is going to be in couple of months. We have seen the worst.”

The Standard & Poor’s 500 Index added 1.3 percent to 862.6 at 10:08 a.m. in New York, extending gains after a report on new-home sales topped estimates. The Dow Jones Industrial Average rose 96.13 points, 1.2 percent, to 8,053.19. The Russell 2000 Index increased 1.5 percent.

The S&P 500 is down 1.3 percent this week on renewed concern that banks may post more credit losses and as share valuations jumped after six weeks of gains. The U.S. benchmark index has rebounded 27 percent from a 12-year low on March 9 on speculation government efforts to fix the banking system and revive the economy will pull the nation out of a recession.

Ford, American Express

Ford Motor jumped 84 cents to $5.33. Ford, the only U.S. automaker not on government aid, posted a first-quarter adjusted loss of 75 cents a share, 40 percent narrower than the $1.24 average of analyst estimates compiled by Bloomberg. Ford’s cash use was $3.7 billion, a drop from $7.2 billion in the fourth quarter.

American Express climbed $2.25 to $23.22. The biggest U.S. credit-card company by purchases reported first-quarter profit from continuing operations of 32 cents a share, more than double the average analyst estimate.

Microsoft, the world’s largest software maker, added 78 cents to $19.70 after yesterday reporting a smaller drop in third-quarter profit than some investors anticipated and predicting bigger cost savings this year. Morgan Stanley raised its recommendation for Microsoft to “overweight” from “equal weight,” citing an “accelerating growth story.”

‘Seen the Worst’

“A lot of the big negative surprises are behind us,” said David Rudow, an analyst with Thrivent Asset Management in Minneapolis. The company oversees about $65 billion, including Microsoft shares. “We’ve seen the worst. It’s just a question of when we see return to growth and normal spending again.”

Amazon.com Inc. advanced 1.8 percent to $82.05. The biggest Internet retailer reported first-quarter sales and profit that beat analysts’ estimates, bolstered by free shipping offers and demand for the Kindle electronic-book reader.

Juniper Networks Inc. climbed 10 percent to $21.22. The second-largest maker of networking equipment forecast second- quarter profit in line with analysts’ estimates and said a measure of profitability will increase from last quarter.

Analysts estimate that profits at S&P 500 companies decreased for the seventh straight quarter in the January to March period, the longest stretch of declines since at least the Great Depression.

Of the S&P 500 companies that reported earnings from the close of trading yesterday through today’s open, 34 beat the average analyst estimate and 16 missed, according to Bloomberg data.

Commodity Gains

Energy and raw-materials producers surged as crude oil rose for a fourth day, copper and metals prices gained and Schlumberger said first-quarter profit fell less than estimated as producers pulled back spending after crude prices tumbled.

Schlumberger surged 7.2 percent to $49.95. Exxon Mobil Corp., the world’s largest oil company, gained 0.7 percent to $66.18. ConocoPhillips added 2.7 percent to $40.99. Chevron Corp. rose 2.5 percent to $67.15.

Crude oil for June delivery increased as much as 4 percent to $51.60 on the New York Mercantile Exchange. Futures are up 14 percent this year and heading for a 1.7 percent weekly gain, the first increase in three weeks.

Stress Tests

Financial shares in the S&P 500 underperformed the rest of the market today, gaining 0.7 percent as a group.

U.S. banks that get preliminary results of government stress tests today may struggle to raise money after bad assets at the biggest lenders almost tripled on average in the past year. The results will be disseminated to representatives of the firms by Federal Reserve officials in a number of meetings at central bank offices today, according to a person familiar with the matter. The Fed is set to release the methodology for the exams to the public today.

Orders for U.S.-made durable goods fell in March less than forecast, adding to signs the economic slump is easing. The 0.8 percent decrease reported by the Commerce Department compares with an anticipated 1.5 percent drop, according to the median in a Bloomberg News survey of economists. The news was tempered by revisions to February figures that showed a much smaller gain than the government previously projected.

U.S. stocks advanced yesterday as better-than-estimated earnings at companies from Marriott International Inc. to ConocoPhillips and EBay Inc. overshadowed a drop in existing home sales and higher jobless claims.

U.S. Stocks Advance on Earnings; Marriott, EBay Shares Rally

U.S. Stocks Advance on Earnings; Marriott, EBay Shares Rally

April 23 (Bloomberg) -- U.S. stocks rose, recouping yesterday’s drop, as better-than-estimated earnings at companies from Marriott International Inc. to ConocoPhillips and EBay Inc. overshadowed falling home sales and higher jobless claims.

Marriott, the biggest U.S. hotel chain, surged 12 percent and helped drive Host Hotels & Resorts Inc., the largest lodging real-estate investment trust, to a 17 percent advance. EBay rallied 12 percent, while Apple Inc. and ConocoPhillips climbed more than 3 percent, after earnings topped analyst projections. NYSE Euronext jumped 14 percent on takeover speculation.

“Even companies that are just meeting expectations are holding up pretty well because many investors were really expecting the very worst,” said Jeffrey Coons, co-director of research at Manning & Napier Advisors Inc., which manages $16 billion in Fairport, New York. “We’re still going to have tough economic and earnings reports. But the amount of pessimism that was embedded in prices gives you a lot of room.”

The Standard & Poor’s 500 Index increased 1 percent to 851.92. The Dow Jones Industrial Average added 70.49 points, or 0.9 percent, to 7,957.06. About 10 stocks gained for every nine that fell on the New York Stock Exchange.

Benchmark indexes fluctuated for most of the day before turning decisively higher in the final half hour of trading. The S&P 500 is up 26 percent from a 12-year low on March 9 as government efforts to fix the financial system and revive economic growth fuel speculation the global recession is subsiding. The Federal Reserve and U.S. government have pledged $12.8 trillion to boost the economy and consumer spending.

Hotel Rally

Analysts estimate that profits at S&P 500 companies decreased for the seventh straight quarter in the January to March period, the longest stretch of declines since at least the Great Depression.

Marriott International Inc. rose $2.41 to $22, its steepest gain of the year. The hotel chain posted a profit from operations excluding charges of 23 cents a share, beating the 13 cents projected by analysts in a Bloomberg survey, as cost cuts helped results.

Other hotel-related stocks also advanced. Host Hotels & Resorts Inc. climbed $1.02 to $7.10. Starwood Hotels & Resorts Worldwide Inc. jumped 11 percent to $19.94.

EBay climbed $1.84 to $16.62. The most-visited U.S. e- commerce site’s better-than-estimated sales and profit signaled that efforts to overhaul its auction and fixed-price retail site are working.

Apple added $3.89 to $125.40 after a doubling in sales of its iPhone and new versions of the iPod helped it sidestep a slump in consumer spending.

ConocoPhillips

ConocoPhillips surged $1.87 to $39.93 as the third-biggest U.S. oil producer said first-quarter profit fell less than analysts estimated after output topped the company’s forecast.

NYSE Euronext, which operates the world’s largest stock exchange, surged $2.81, or 14 percent, to $23.37 after Manager- Magazin reported that Deutsche Boerse AG restarted merger talks, citing unidentified people in the financial industry. Still, four people familiar with the situation told Bloomberg News that the second round of talks since January probably won’t result in a takeover.

Pactiv Corp. climbed the most in the S&P 500, advancing 21 percent to $20.82. The maker of Hefty garbage bags increased its forecast, predicting earnings excluding some items of at least $1.97 a share this year.

RadioShack Corp. gained 15 percent to $12.39. The electronics chain reported first-quarter earnings per share of 34 cents, beating the average analyst estimate by 59 percent.

Financials Gain

The S&P 500 Financials Index of 80 banks, insurers and investment firms rose 4.5 percent for the biggest gain among 10 industry groups in the index. The gauge is up 76 percent from a 17-year low reached March 6.

Fifth Third Bancorp gained 3.5 percent to $3.82. The Ohio bank reported a loss per share excluding items that was narrower than the consensus estimate of 28 cents.

PNC Financial Services Group Inc. added 7.5 percent to $40.93. The fifth-largest U.S. bank by deposits said first- quarter profit rose 38 percent on higher mortgage income as customers refinanced their homes.

American Express Co., the largest credit-card company by purchases, surged 7.9 percent for the biggest gain in the Dow average. Bank of America Corp. rose 6.8 percent to $8.82. Wells Fargo & Co. jumped 11 percent to $20.09. Capital One Financial Corp. rallied 18 percent to $16.93.

GM, Home Depot

General Motors Corp. slumped 4.1 percent to $1.62 for the biggest decline in the Dow average. The automaker said the lack of a resolution in Delphi Corp.’s bankruptcy could force GM into an uncontrolled shutdown. General Motors said it will idle 13 assembly plants for multiple weeks to reduce inventory.

Home Depot Inc., the largest home-improvement retailer, lost 41 cents, or 1.6 percent, to $25.76. Purchases of existing homes decreased 3 percent to an annual rate of 4.57 million, lower than forecast, from 4.71 million in February, the National Association of Realtors said. The median price slumped 12 percent from a year ago and distressed properties accounted for about 50 percent of sales

United Parcel Service lost 2.6 percent to $53.33. The world’s largest package-delivery company posted a profit that trailed estimates and forecast second-quarter earnings short of analysts’ projections as the recession ravages shipping demand.

‘Under Pressure’

U.S. economic weakness will mean that profit margins will “remain under pressure” throughout 2009, UPS Chief Financial Officer Kurt Kuehn said on a conference call with analysts and investors.

A gauge of 28 raw-materials producers fell 0.3 percent for the second-biggest decline in the S&P 500 among 10 industry groups as copper prices slumped and Nucor Corp. reported its first quarterly loss in at least 19 years.

Nucor, the second-largest U.S.-based steel producer, fell 9.2 percent to $40. U.S. Steel Corp. and AK Steel Holding Corp. lost at least 4.6 percent.

Copper fell 3.4 percent, capping the biggest four-day drop this year, as a jump in claims for jobless benefits triggered concern that a weak labor market will prolong the recession and a slump in metal demand. The metal is down 9.4 percent this week, the sharpest four-day slide since Dec. 5.

The number of Americans filing first-time applications for unemployment insurance rose last week to 640,000 as forecast. Total benefit rolls climbed to 6.14 million, reaching a record for a 12th straight week and indicating the labor market continues to deteriorate.

U.S. Stocks Tumble as Financials, Commodity Shares Retreat

U.S. Stocks Tumble as Financials, Commodity Shares Retreat

April 20 (Bloomberg) -- U.S. stocks tumbled, led by the biggest drop in financial shares in three months, as concern grew that credit losses are worsening and lower commodity prices dragged down energy and material producers.

Bank of America Corp., the lender that lost more than three-quarters of its market value in the past year, plunged 24 percent as rising charge-offs for bad loans overshadowed better- than-estimated earnings. Citigroup Inc. dropped 19 percent after Goldman Sachs Group Inc. said the bank’s credit losses are growing at a “rapid rate.” U.S. Steel Corp. and Exxon Mobil Corp. declined as oil and industrial metal prices decreased.

“The market seems to follow the direction of financial stocks one way or another,” said Keith Wirtz, who helps oversee $20 billion as chief investment officer at Fifth Third Asset Management in Cincinnati. “There are definitely more writedowns ahead and more challenges for the loan portfolios, particularly in the consumer side of the equation.”

The Standard & Poor’s 500 Index slid 4.3 percent to 832.39, its steepest tumble since March 2. The Dow Jones Industrial Average lost 289.6 points, or 3.6 percent, to 7,841.73. The Russell 2000 Index retreated 5.6 percent. About 20 stocks fell for each that gained on the New York Stock Exchange, the broadest decline since Feb. 10.

Benchmark indexes opened lower and extended declines in early trading after the Conference Board’s gauge of leading economic indicators fell more than forecast.

VIX Rebounds

The VIX, which measures the cost of using options as insurance against declines in the S&P 500, jumped 15 percent to 39.18 for its steepest advance in three months. The index, which has fallen for four straight weeks, closed at a six-month low on April 17.

The S&P 500 wrapped up its steepest six-week gain since 1938 on April 17, as profits at Goldman Sachs and JPMorgan Chase & Co. ignited gains in bank shares. The rally may falter as a prolonged recession dents corporate earnings, George Hoguet, global investment strategist at Boston-based State Street Global Advisors Inc., said in an April 18 interview.

The S&P 500 surged 29 percent from a 12-year low on March 9 through last week as expectations grew that the worst of a global recession is past. The rally came even as analysts estimate that profits at S&P 500 companies decreased for the seventh straight quarter in the January to March period, the longest stretch of declines since at least the Great Depression.

‘Period of Consolidation’

“We’re going to get a lot of earnings releases this week and by and large they’re going to be disappointing,” said Stanley Nabi, vice chairman of Silvercrest Asset Management Group, which oversees $8 billion in New York. “Besides, we’ve had a very sharp run-up in the market. So I see a period of consolidation now, maybe a week or two of declines.”

Bank of America fell $2.58 to $8.02 even after saying first-quarter net income more than tripled on gains from home refinancing and trading. Reserves for future loan losses increased 57 percent to $13.4 billion since the end of December. Charge-offs for uncollectible loans more than doubled to $6.94 billion from the same period a year earlier.

Citigroup declined 71 cents to $2.94. The bank’s credit losses are growing at a “rapid rate,” undermining Chief Executive Officer Vikram Pandit’s efforts to stabilize the company, according to Goldman Sachs.

While Citigroup posted first-quarter net income of $1.6 billion last week, the New York-based bank suffered an “underlying” loss of 38 cents a share, Richard Ramsden, a Goldman Sachs analyst, wrote in a research note dated yesterday. He repeated a “sell” rating on the stock.

Capital One, AIG Slump

Capital One Financial Corp. dropped 25 percent to $13.38, the steepest loss in the S&P 500, after the McLean, Virginia- based credit card lender was cut to “neutral” from “buy” at Goldman Sachs.

American International Group Inc. fell 20 percent to $1.29. The insurer bailed out by the U.S. agreed to sell preferred stock and warrants for common shares to the government in return for access to $29.8 billion.

The S&P 500 Financials Index of 80 banks, insurers and investment firms slumped 11 percent, its biggest slide since Jan. 20. The gauge is still up 62 percent from a 17-year low reached March 6.

Regional banks tumbled, with Fifth Third Bancorp, Marshall & Ilsley Corp. and Huntington Bancshares Inc. dropping at least 20 percent.

Stress Tests

Nobel Prize-winning economist Michael Spence said he doesn’t expect every bank to pass stress tests run by the U.S. government to assess their financial health.

Spence said in an interview with Bloomberg Television he would be “very surprised” if all the banks pass the exam, which he says will probably give a better picture of their health than earnings statements. He also said that “the data on lending and credit are still not that encouraging.”

Obama administration officials signaled there may be no need to request more financial-rescue funds from Congress as several banks plan to return taxpayer money and others are pushed to tap private markets first. The White House chief of staff, Rahm Emanuel, said while he had not seen results of stress tests on the 19 biggest banks, he believed the White House won’t have to request more bailout funds.

“The first resort for more capital is going to the private markets,” by issuing new equity or swapping some liabilities into stock that dilutes other shareholders, National Economic Council Director Lawrence Summers said.

More Losses Predicted

Global banks are likely to suffer about $400 billion more in losses on soured assets, requiring further injections of government capital, according to JPMorgan mortgage-bond analysts led by Matthew Jozoff in a report dated April 17.

Lennar Corp. slumped 19 percent to $7.60 as the fourth biggest U.S. homebuilder by revenue said it has entered agreements for the possible sale of up to $275 million in Class A common stock.

Gauges of energy and raw-material producers fell by more than 4 percent after crude oil sank the most in seven weeks as a stronger dollar reduces the appeal of commodities. Copper, aluminum, corn, wheat and soybean prices also declined, while gold and silver gained as investors sought a haven from falling stocks.

Exxon, ConocoPhillips Slump

Exxon Mobil, the world’s largest oil company, fell 2.2 percent to $65.29. ConocoPhillips, the second-largest U.S. oil refiner, declined 5.6 percent to $37.94. U.S. Steel Corp. plunged 11 percent to $26.58.

Crude oil for May delivery fell $4.45, or 8.8 percent, to $45.88 a barrel on the New York Mercantile Exchange. Copper slid 4.2 percent, the most in two months.

Sun Microsystems Inc. surged 37 percent to $9.15, the biggest of only 20 gains in the S&P 500, after Oracle Corp. agreed to buy the fourth-biggest server maker for $9.50 a share in cash. The transaction is valued at approximately $7.4 billion.

PepsiCo Inc., the world’s second-largest soft-drink maker, offered about $6 billion in cash and stock to buy out other shareholders of its two biggest bottlers to gain greater control over product sales in North America. The shares slipped $2.27, or 4.4 percent, to $49.86. Pepsi Bottling Group Inc. rallied 22 percent to $30.73 for the second-biggest advance in the S&P 500.

‘Still Bearish’

Nouriel Roubini, the New York University professor who predicted the financial crisis, said that he was “still bearish” and that an economic recovery is going to take “longer than expected.” Corporate earnings will “surprise on the downside,” Roubini said in a speech in Hong Kong today. “Lots of banks, even the better ones, are going to be in trouble.”

The index of U.S. leading economic indicators fell more than forecast in March, signaling what may be the longest recession in the postwar era will extend into the second half of the year.

The Conference Board’s gauge fell 0.3 percent after a 0.2 percent drop in February that was smaller than previously estimated, the New York-based research group said today. The index points to the direction of the economy over the next three to six months.