U.S. Stocks Retreat

U.S. stocks fell as dividend cuts triggered a sell-off in insurers and an unexpected drop in home sales dragged down industrial shares, overshadowing speculation that banks will pass the government’s so-called stress tests.
TradingEconomics.com, Bloomberg 2/25/2009 1:35:33 PM

Lincoln National Corp. tumbled 14 percent after reducing its payout by 95 percent, while Allstate Corp. lost 5.7 percent after cutting its in half. Caterpillar Inc. and Hovnanian Enterprises Inc. declined at least 3.8 percent as a Realtors group said sales of existing homes slid 5.3 percent in January to the lowest since 1997. Bank of America Corp. jumped 9.1 percent as Chief Executive Officer Kenneth Lewis said his bank will pass the government’s review of its balance sheet.

The S&P 500 slid 1.1 percent to 764.89 a day after rebounding from a 12-year low. The Dow Jones Industrial Average fell 80.05 points, or 1.1 percent, to 7,270.89. The Russell 2000 Index lost 2.7 percent. Almost four stocks fell for each that rose on the New York Stock Exchange.

European stocks retreated as Ukraine’s credit rating was cut two levels by S&P a day after Latvia was downgraded to junk, spurring concern that the deteriorating credit outlook in Eastern Europe will deepen bank losses. U.S. stocks tumbled to their lows of the day as the National Association of Realtors said sales of existing homes fell last month to an annual rate of 4.49 million and the median price dropped 15 percent.

The S&P 500 jumped 4 percent yesterday to halt a six-day slide, the longest stretch of declines since October, after Federal Reserve Ben S. Bernanke said banks may not need to be nationalized. The benchmark index for U.S. equities is down 15 percent this year after losing 38 percent in 2008 for its biggest annual tumble since 1937.

Financial stocks dropped as much as 6.5 percent before paring losses and closing down 0.5 percent as a group after regulators provided details of their plans to review bank balance sheets. The group posted its biggest gain in a month yesterday with a 12 percent surge.