U.S. Stocks Drop on Concern Global Economic Slump Is Worsening

By Lynn Thomasson

Oct. 27 (Bloomberg) -- U.S. stocks fell and the Standard & Poor's 500 Index extended its worst monthly plunge in 70 years on concern the global economic slowdown is deepening.

Benchmark indexes pared declines as First Horizon Corp. led a rally in regional banks that accepted about $28 billion in government cash. ConocoPhillips and Occidental Petroleum Corp. lost more than 2.5 percent as crude oil slid to its lowest price since May 2007 on expectations a worldwide recession will reduce demand. General Motors Corp. declined 2.9 percent after two people with knowledge of the matter said the world's largest automaker asked the Treasury for financial help to complete a merger with Chrysler LLC.

``While we may not be in a technical recession, we're getting closer to it,'' said Jason Cooper, who helps manage about $3.5 billion at 1st Source Investment Advisors in South Bend, Indiana. ``I can't imagine that with everything happening overseas, that we're going to be completely unscathed by this.''

The Standard & Poor's 500 Index slipped 5.9 points, or 0.7 percent, to 870.88 at 10:18 a.m. in New York. The Dow Jones Industrial Average lost 44.44, or 0.5 percent, to 8,334.51. The Nasdaq Composite Index retreated 11.99, or 0.8 percent, to 1,540.04. Almost two stocks fell for each that rose on the New York Stock Exchange.

Futures trading before the open of U.S. exchanges pointed to steeper declines before Bill Gross, manager of the world's biggest bond fund, told CNBC the Federal Reserve's purchase of commercial paper will help reduce borrowing costs.

U.S. stocks plunged last week, driving the S&P 500 toward the steepest monthly loss since 1938, on concern the seizure in credit markets will curb earnings more than analysts anticipated at industrial, consumer and technology companies.

Reports this week may show the U.S. economy shrank last quarter for the second time in a year as consumers and companies retrenched. Futures on the Chicago Board of Trade show a 30 percent chance the Fed will lower its target for overnight bank loans, now 1.5 percent, by 75 basis points. That's up from no chance a week ago. Odds for a half-point cut are 70 percent.

``A cut would send a positive signal that the Fed remains vigilant in keeping the financial system fluid and flooded with money as the credit markets thaw,'' said Mark Luschini, who oversees $1 billion as chief investment officer at Parker Hunter Asset Management in Pittsburgh.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net