Thursday 27 March 2008

U.S. Stocks Fall on Banking Outlook, Durable Goods Orders Slump

U.S. stocks fell for the first time in four days on a worsening outlook for bank profits, an unexpected drop in durable goods orders and concern that financing for buyouts will collapse.

Citigroup Inc. tumbled the most in the Dow Jones Industrial Average and led financials to their biggest retreat in almost two weeks after Oppenheimer & Co.'s Meredith Whitney said the largest U.S. bank's quarterly loss will be four times bigger than previously forecast. Deere & Co. and United Technologies Corp. declined on the government's report showing the worst-ever slump in machinery demand. Clear Channel Communications Inc. posted its steepest decrease since 1989 on concern banks will pull loans for the broadcaster's $19.5 billion takeover.

The Standard & Poor's 500 Index lost 11.86, or 0.9 percent, to 1,341.13. The Dow slid 109.74, or 0.9 percent, to 12,422.86. The Nasdaq Composite Index declined 16.69, or 0.7 percent, to 2,324.36. More than two stocks fell for every one that rose on the New York Stock Exchange.

``The challenges and headwinds financials face now are many and have direct implications for the average consumer,'' said Michael Barron, chief executive officer and portfolio manager at Knott Capital Management in Exton, Pennsylvania, which oversees $1 billion. The drop in durable goods orders is ``yet another indication that the economy is in a recession.''

$208 Billion Fallout

Seven of the 10 S&P 500 industry groups fell following the unexpected 1.7 percent decline in orders for goods meant to last several years in February. The S&P 500 is down 14 percent from its Oct. 9 record and has slumped 8.7 percent this year after banks around the world racked up more than $208 billion in credit losses and writedowns from mortgage debt since the beginning of 2007.

About 1.43 billion shares changed hands on the NYSE, the slowest trading session since Feb. 22. European shares fell, while Asia's regional benchmark index climbed for a fourth day.

Citigroup lost $1.37, or 5.9 percent, to $22.05. Whitney cut her full-year estimate to a loss of 15 cents a share from profit of 75 cents to reflect potential first-quarter writedowns on leveraged loans and collateralized debt obligations of $13.1 billion. In the first quarter, the bank may lose $1.15 a share, compared with an earlier loss estimate of 28 cents, she said.

As ``the U.S. consumer comes under increasing pressure, we anticipate further downside to both estimates and stock prices,'' Whitney wrote in a report dated yesterday.

Bank of America Corp. fell $1.13, or 2.8 percent, to $39.84. Goldman Sachs Group Inc.analysts reduced their earnings-per- share estimate for this year to $3.35 from $4.05, citing an estimated $3 billion first-quarter writedown.

Deutsche Bank AG, Germany's biggest bank, fell almost 3 percent in Frankfurt after its annual report said possible asset writedowns and slowing economic growth will make it harder to reach its full-year profit goal.

'Alarm Flag'

Deere, the world's largest maker of tractors and combines, fell $1.42 to $80.82. United Technologies, the maker of Otis elevators and Chubb security systems, dropped 55 cents to $69.61.

The decline in orders for durable goods ``raises the alarm flag,'' Peter Sorrentino, senior portfolio manager at Huntington Asset Management, which oversees $15 billion in Cincinnati, said in an interview on Bloomberg Radio. ``One of our views to carry the economy through this year was a weak consumer but strong on the industrial side.''

Clear Channel

Clear Channel plunged $5.64, or 17 percent, to $26.92 for the second-biggest drop in the S&P 500. The Wall Street Journal said banks financing the deal for Thomas H. Lee Partners LP and Bain Capital LLC haven't been able to agree with the buyers on terms. The report cited unidentified people familiar with the matter. Lehman Brothers Holdings Inc. cut its price estimate on the stock by 36 percent to $25.

Centex Corp. and D.R. Horton Inc. led homebuilders to a 5.9 percent drop, the biggest in almost three weeks, after a government report showed sales of new homes fell 1.8 percent to a 13-year low in February. The annual rate of new home sales slowed to 590,000, down 57 percent from its July 2005 peak of 1.39 million. Centex slid $2.06 to $23.73. D.R. Horton lost $1.05 to $15.20.

Jabil Circuit Inc., the maker of phones for Nokia Oyj and electronics for Hewlett-Packard Co., declined $2.09, or 18 percent, to $9.29, for the biggest drop in the S&P 500. Third- quarter and full-year profit and sales forecasts trailed analysts' estimates. JPMorgan Chase & Co. downgraded the stock to ``underweight'' from ``overweight.''

Hewlett-Packard Co., the world's largest personal computer maker, fell 92 cents to $47.34.

Oracle Sales Miss

Oracle Corp., the world's third-largest software maker, slumped in trading after the close of U.S. exchanges after third- quarter sales fell short of analyst expectations. Sales including maintenance fees from acquired companies totaled $5.37 billion, compared with an average forecast of $5.41 billion. The shares, which fell 14 cents to $20.94 in the regular session, tumbled 9.5 percent to $18.95 in after-hours trading.

Benchmark equity indexes briefly pared losses as traders speculated lawmakers will force changes to JPMorgan's bid for Bear Stearns Cos. and Rambus Inc., the designer of chips for the PlayStation video-game console, won a lawsuit.

Rambus rallied $7.25, or 39 percent, to $25.86 for its steepest advance in almost five years after it won the final phase of its patent suit against Hynix Semiconductor Inc., the first step toward collecting royalties from other manufacturers.

Bear Stearns climbed 27 cents, or 2.5 percent, to $11.21. The Senate Finance and Banking committees said they are reviewing the government-backed sale of Bear to JPMorgan.

Commodities Rally

Freeport-McMoRan Copper & Gold Inc. added $5.03, or 5.4 percent, to $97.44. Goldman Sachs analysts said the world's second-largest copper producer is a candidate to be acquired by Brazil's Cia. Vale do Rio Doce. Vale's bid to buy Xstrata Plc to create the largest mining company collapsed yesterday.

Exxon Mobil Corp. and Schlumberger Ltd. led energy shares to a fourth-straight gain as crude oil rose on a government report showing inventories increased less than forecast last week. Exxon Mobil, the biggest U.S. oil company, climbed the most in the Dow average, adding $1.06 to $86.26. Schlumberger, the world's largest oilfield-services provider, rallied $3.88 to $86.52.

Crude oil for May delivery climbed 4.6 percent to $105.90 a barrel in New York. The futures price of oil touched a record $111.80 a barrel on March 17 and has quadrupled in the past six years.

Apache, BJ Services

Apache Corp. jumped $6.81, or 6 percent, to $119.75 for the biggest gain in the S&P 500 after Sanford C. Bernstein & Co. analyst Benjamin Dell raised his forecasts for crude oil and natural gas and increased share-price targets for several producers including Apache. Dell increased his target for Apache to $133.

BJ Services Co., the third-largest provider of pressure- pumping services for oil and gas wells, gained for a third straight day, adding $1.35 to a five-month high of $27.78. Devon Energy Corp., the biggest independent oil and natural gas producer in the U.S., rallied $4.66 to a record $107.59.

Consol Energy Inc. and Alpha Natural Resources Inc. advanced after Goldman analyst Michael Molnar said they would gain the most from higher prices for coal used in steelmaking. Consol, the third-biggest U.S. coal producer, and Alpha were raised to ``buy'' from ``neutral'' and ``sell.'' Consol rose $2.33, or 3.4 percent, to $70.59. Alpha added $3.02, or 7.7 percent, to $42.34.

Motorola Inc., the biggest U.S. maker of mobile phones, climbed 26 cents to $10.02 after announcing plans to split into two publicly traded companies. One company will focus on handsets and the other will sell broadband networking devices.

The Russell 2000 Index, a benchmark for companies with a median market value of $532 million, dropped 0.5 percent to 702.11. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, fell 0.8 percent to 13,518.29. Based on its decline, the value of stocks decreased by $131.7 billion.