U.S. Stocks Drop on Earnings Concern; Citigroup, RIM Retreat

By Michael Patterson

June 26 (Bloomberg) -- U.S. stocks tumbled, sending the Dow Jones Industrial Average to its lowest since October 2006, after analysts said Citigroup Inc. will post more writedowns and Research In Motion Ltd. forecast earnings that trailed estimates.

Citigroup led bank and brokerage stocks to a five-year low as Goldman analysts said the lender may report an $8.9 billion second-quarter charge and cut its dividend. Research In Motion, maker of the BlackBerry e-mail phone, posted its biggest drop since 2004 on concern competition with Apple Inc.'s iPhone is reducing earnings. Oracle Corp., the world's second-largest software maker, declined the most since April after predicting the slowest sales growth since 2006.

Standard & Poor's 500 Index lost 13.92, or 1.1 percent, to 1,308.05 at 9:35 a.m. in New York, extending its 2008 retreat to 11 percent. The Dow decreased 109.68, or 0.9 percent, to 11,702.15. The Nasdaq Composite Index sank 40.03 to 2,361.23. Six stocks fell for each that rose on the New York Stock Exchange.

``Most investors are going to sit on the sidelines until they're more certain the sharks have left the waters and it's safe to go back in,'' said Bruce McCain, the Cleveland-based head of investment strategy at Key Private Bank, which oversees about $30 billion. ``The writeoffs have been far worse than anyone would have imagined.''

Nine of 10 industry groups retreated as higher-than-forecast initial jobless claims also weighed on the market. The Commerce Department said the U.S. economy expanded at an annual rate of 1 percent in the first quarter, capping the weakest six months of growth in five years, as measures of inflation accelerated more than previously projected. Energy shares posted the only advance as oil climbed more than $3 a barrel.

European stocks fell after Belgium-based lender Fortis scrapped its dividend and said it will sell shares. Asian stocks advanced.

To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net.