U.S. Stocks Retreat, Led by Financials


U.S. stocks fell for a third day to the lowest level since 2006, led by a plunge in financial shares, on speculation earnings estimates will prove to be too high as the economy slows and credit losses spread.

The decline in banks steepened as Bear Stearns Cos. tumbled the most since 1987 on concern the brokerage was facing financial difficulties, even after former Chief Executive Officer Alan Greenberg said the speculation was ``ridiculous.'' Fannie Mae and Freddie Mac, the largest U.S. mortgage finance providers, both lost more than 11 percent on expectations they face increasing losses as the housing slump deepens.

The Standard & Poor's 500 Index declined 20 points, or 1.6 percent, to 1,273.37 and is down almost 19 percent from its Oct. 9 record. The Dow Jones Industrial Average lost 153.54, or 1.3 percent, to 11,740.15. The Nasdaq Composite Index decreased 43.15, or 2 percent, to 2,169.34. Five stocks fell for every one that rose on the New York Stock Exchange.

All 10 industry groups in the S&P 500 dropped today on growing concern that the economy will slip into a recession after banks posted $188 billion in subprime-related losses and analysts forecast earnings for members of the index will decline this quarter and next. The benchmark for U.S. equities is approaching a so-called bear market, which is marked by a decline of at least 20 percent from a peak.

Financial shares in the S&P 500 slumped 3.1 percent as a group today to the lowest level since May 2003 and contributed the most to the broader index's retreat. Producers of raw materials slumped 3.3 percent and industrial companies dropped 1.8 percent as a group.

Bear Stearns, the second-biggest underwriter of mortgage- backed bonds, tumbled $7.78, or 11 percent, to $62.30, its steepest drop since October 1987.

Financial companies in the S&P 500 have dropped 20 percent this year, dragged down by the collapse of the subprime-mortgage market.

Stocks also fell after crude oil rose above $108 a barrel in New York to a record as investors purchased futures because the returns have outpaced those of financial markets. Crude oil for April delivery climbed $2.75, or 2.6 percent, to $107.90 a barrel in New York. Futures surged to $108.21 a barrel today, the highest since trading began in 1983.

The Russell 2000 Index, a benchmark for companies with a median market value 96 percent less than the S&P 500's, dropped 2.5 percent to 643.97. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, fell 1.8 percent to 12,822.54. Based on its decline, the value of stocks decreased by $287 billion.

 


TradingEconomics.com, Bloomberg
3/10/2008 4:32:20 PM