U.S. Stocks Retreated


U.S. stocks retreated for a fifth day as Federal Reserve Chairman Ben S. Bernanke said the banking system still hasn’t stabilized, offsetting gains in commodity shares on speculation China will boost demand for raw materials.

Goldman Sachs Group Inc. and MetLife Inc. dragged a gauge of financial companies in the Standard & Poor’s 500 Index to its lowest level since 1992. Home Depot Inc. fell more than 4.6 percent for a second day as fewer Americans than forecast signed contracts to buy previously owned homes. Freeport-McMoRan Copper & Gold Inc. jumped 7.3 percent as China, the world’s largest consumer of copper, said its economy will recover this year.

The S&P 500 slid 0.6 percent to 696.33, its first close below 700 since October 1996. The Dow Jones Industrial Average lost 37.27 points, or 0.6 percent, to an almost 12-year low of 6,726.02. The Russell 2000 Index slipped 1.9 percent. Almost two stocks fell for each that rose on the New York Stock Exchange.

The S&P 500 climbed as much as 1.6 percent in early trading after yesterday’s sell-off left companies in the index valued at their cheapest relative to earnings since 1986. The index traded at 12.2 times company profits from the past 10 years as of yesterday’s close, according to data compiled by Yale University professor Robert Shiller, who uses a decade of profits to smooth out short-term fluctuations.

The early rally was erased after Bernanke, testifying before the Senate Budget Committee, spurred concern that the government won’t be able to shore up a financial system battered by $1.1 trillion in global credit losses.


TradingEconomics.com, Bloomberg
3/3/2009 2:10:45 PM