LATEST:-U.S. Stocks Fall, S&P 500 Completes Fourth Straight Weekly Loss

Thursday, January 7, 2010

July 10 (Bloomberg) -- U.S. stocks dropped, sending the Standard & Poor’s 500 Index to a fourth straight weekly loss, as a deeper-than-estimated slide in consumer confidence added to concern the economic recovery will be delayed.

CIT Group Inc., the century-old lender that trades in the bond market as if it may fail, slid 18 percent on concern the Federal Deposit Insurance Corp. won’t guarantee its bond sales. Chevron Corp. helped lead the Dow Jones Industrial Average lower as oil completed its worst weekly drop since January and the company said the weaker dollar was slashing profit. Technology shares rose, limiting the market’s slide, following analyst upgrades of Yahoo! Inc. and MEMC Electronic Materials Inc.

“We’re finding out that the economy is not recovering in any significant way at all,” said Christian Thwaites, president and chief executive officer of Sentinel Investments in Montpelier, Vermont, which manages $19 billion. “The market is still relatively expensive on a current earnings basis.”

The S&P 500 slipped 0.4 percent to 879.13 at 4:08 p.m. in New York and lost 1.9 percent over the past five days, capping its longest weekly losing streak since March. The Dow declined 36.65, or 0.5 percent, to 8,146.52. Less than 7 billion shares changed hands on all U.S. exchanges, the slowest trading day since Jan. 2. Equities extended their declines as the Reuters/University of Michigan index of consumer confidence trailed economist estimates.

Recession Concern

The S&P 500 has dropped more than 7.1 percent since June 12 on concern its rebound of as much as 40 percent since March outpaced prospects for a recovery from the longest slump in profits on record. The index is trading for about 14 times its companies’ earnings over the past 12 months, compared with about 10 times on March 9, the day the gauge slid to a 12-year low.

The worst recession in half a century may be prolonged because consumers see few signs that job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.

The U.S. needs another stimulus package because President Barack Obama’s initial $787 billion plan hasn’t been implemented fast enough, according to Shiller. Roubini, the economics professor at New York University who predicted the financial crisis, said the recession will likely continue for six months as companies struggle to pay their creditors.

The economy shrank 5.5 percent in the first quarter and 6.3 percent in the fourth quarter of 2008, the worst six months since 1958, according to data compiled by Bloomberg.

Analysts estimate profits of S&P 500 companies fell 35 percent last quarter from a year earlier after plunging 33 percent in the first quarter, Bloomberg data show. They forecast a 21 percent year-on-year drop in the third quarter.

Chevron’s Slide

Chevron declined 2.7 percent to $61.40. The second-biggest U.S. energy producer said the falling dollar slashed overseas profit from oil and natural-gas wells by almost $7 million a day during April and May, more than double the impact of currency fluctuations during the second quarter of 2008.

Crude oil fell 0.9 percent to $59.89 a barrel in New York, the lowest settlement in almost two months, on concern a prolonged global recession will sap demand for energy. Crude plunged 10 percent this week.

CIT Group tumbled 18 percent to $1.53. The Federal Deposit Insurance Corp. is unwilling to guarantee the company’s bond sales because the commercial lender’s credit quality is worsening, according to people familiar with the regulator’s thinking.

Technology Outperforms

Technology companies added 0.4 percent as a group, the best performance among 10 industries in the S&P 500. MEMC Electronic Materials rose 3 percent to $16.61. The maker of silicon wafers for solar modules and semiconductors was raised to “buy” from “hold” at Citigroup Inc., which said the company is “starting to reap meaningful cost reductions.”

Yahoo gained 2.6 percent to $14.93. The owner of the world’s second-most-used Internet search engine was raised to “market weight” from “underweight” by Thomas Weisel Partners analyst Christa Quarles.

SanDisk Corp. increased 3.2 percent to $14.47. Morgan Stanley lifted its 2010 earnings-per-share estimate for the biggest maker of flash-memory cards and said the company’s 2009 loss was likely to be narrower than it previously estimated.

Dell Inc. rose 0.5 percent to $13.22. Goldman Sachs upgraded the world’s second-biggest maker of personal computers to “conviction buy” from “neutral.” Goldman raised its rating on the computer-hardware industry to “attractive” from “neutral,” saying “downward estimate revisions are mostly behind us” and “we see greater upside than downside to estimates into the seasonally stronger second half of the year and in 2010.”

Faster Growth Forecast

The U.S. economy will expand faster than previously forecast in the second half of this year and in 2010 as a revival in consumer spending signals an end to the recession, a Bloomberg News survey showed.

Growth will average 1.5 percent in the July-to-December period, compared with last month’s 1.2 percent projection, according to the median of 57 forecasts in the survey taken from July 2 to July 8. The jobless rate will exceed 10 percent early next year and average 9.8 percent for 2010.

IBM fell 1.2 percent to $100.83. The world’s biggest computer-services provider was downgraded to “neutral” from “buy” at Goldman Sachs, which said investors will “shift their focus from earnings resiliency in a period of soft demand to companies with greater operating leverage and higher top-line growth as tech spending improves.”


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