By Eric Martin
Nov. 17 (Bloomberg) -- U.S. stocks tumbled, extending a two- week drop, as a record contraction in New York manufacturing and Citigroup Inc.’s plan to cut 52,000 jobs spurred concern the recession will deepen.
Alcoa Inc., the largest U.S. aluminum producer, lost 11 percent after UBS AG cut its recommendation on the shares and the Federal Reserve Bank of New York’s general economic index slid to the lowest level since records began in 2001. Citigroup fell 6.6 percent to its lowest price since May 1996. Hartford Financial Services Group Inc. plunged 27 percent as Barclays Plc said the insurer may face more “negative developments.”
“You’re going to continue to get barraged with bad economic data,” Bill Stone, who oversees $56 billion as chief investment strategist at PNC Wealth Management in Philadelphia, told Bloomberg Television. “Earnings have hit a wall or fallen off a cliff in a lot of cases. You’re not likely to see much help from this front for a while.”
The S&P 500 declined 2.6 percent to 850.75 after swinging between gains and losses at least 18 times as energy shares climbed earlier in the day. The Dow Jones Industrial Average decreased 223.73, or 2.6 percent, to 8,273.58. The Nasdaq Composite slid 2.3 percent to 1,482.05, a five-year low. Three stocks fell for each that rose on the New York Stock Exchange.
The tumble in U.S. equities today followed declines in Asia and Europe after Japan unexpectedly slid into a recession and Britain’s biggest business lobby said the U.K. slump may be deeper than earlier predicted.
42% Plunge
Rates on three-month Treasury bills, viewed as a haven in times of turmoil, fell 4 basis points to 0.09 percent on the day. They touched 0.02 percent Sept. 17, the lowest since at least 1940.
The S&P 500 is down 42 percent this year as credit-related losses and writedowns at financial firms worldwide topped $966 billion, threatening global economic growth. The benchmark index for U.S. equities is on course for the steepest annual decline since 1931.
Profits slumped 17 percent on average at companies in the S&P 500 that have reported third-quarter results, according to Bloomberg data. Analysts expect an 8.5 percent drop in full-year earnings, based on estimates compiled by Bloomberg.
About 1.3 billion shares changed hands on the floor of the NYSE, 12 percent fewer than the three-month daily average. All 24 industries in the S&P 500 retreated.
Alcoa slid $1.17 to $9.67, helping send the Morgan Stanley Cyclical Index, a gauge of companies most reliant on economic growth to boost earnings, down 3.4 percent to the lowest level since April 2003. The shares were lowered to “neutral” from “buy” at UBS on “uncertainty” in the aluminum market.
Bulldozers, Tractors
Caterpillar Inc., the biggest maker of bulldozers, lost 3.4 percent to $35.70, while Deere & Co., the largest tractor manufacturer, retreated 3.1 percent to $32.74.
Manufacturing in New York contracted in November as orders and sales plunged, the New York Fed’s index showed. The measure fell to minus 25.4, the lowest since records began in 2001, from minus 24.6 percent in October, the bank said. Readings below zero for the Empire State index signal manufacturing is shrinking.
Citigroup fell 63 cents to $8.89. Chief Executive Officer Vikram Pandit said the bank will eliminate 52,000 jobs over the next year, twice the target announced last month, as loan losses surge and the economy shrinks.
An index on financial stocks in the S&P 500 fell 6 percent. Bank of America Corp., the lender that’s buying Merrill Lynch & Co., dropped 8.5 percent to $15.03. Goldman Sachs Group Inc. declined 6.4 percent to $62.49.
‘Treacherous Time’
“The combination of the difficult economic times and the lack of business in that space causes firms like Goldman and the Wall Street banks to really look hard at their model,” Phil Maisano, chief investment strategist at BNY Mellon Asset Management, which manages about $880 billion, said in a Bloomberg Television interview. “This is a bit of a treacherous time.”
Hartford dropped the most in the S&P 500, losing $3.39 to $9.26 and leading insurance companies to an 8.3 percent decline, the steepest among 24 industries.
Barclays advised investors to limit holdings in Hartford, saying the company is “still going uphill” and may face more “negative developments” in the near term. Hartford also said it plans to inject $100 million of capital in Sanford, Florida-based Federal Trust Bank, the lender it’s buying to qualify for Treasury aid.
MetLife Inc., the biggest U.S. life insurer, sank 21 percent to $22.23. Prudential Financial Inc. lost 17 percent to $20.89.
12-Year Low
CIT Group Inc., the largest independent U.S. commercial lender, also plans to sell shares and buy back debt to bolster its ability to absorb losses as the company seeks as much as $2.5 billion from the U.S. government. CIT fell 16 percent to $3.49.
The KBW Bank Index’s retreat to a 12-year low may signal investors in U.S. financial stocks are “ignoring” an improvement in credit markets since October that’s unlikely to reverse, according to Morgan Stanley.
The financial sector is “fairly valued to moderately cheap,” Abhijit Chakrabortti, Morgan Stanley’s New York-based head of global equity strategy, wrote in a research note dated yesterday. He recommended shares of Wells Fargo & Co., JPMorgan Chase & Co., PNC Financial Services Group Inc., Bank of New York Mellon Corp. and State Street Corp.
Target Corp. fell 4.1 percent to $31.68. The second-largest U.S. discount chain said third-quarter profit fell as customers shunned higher-priced goods in favor of necessities and projected lower fourth-quarter earnings than some analysts had estimated. The company also suspended its share buyback program and cut planned capital spending for 2009 by $1 billion.
General Motors Corp. increased 5.7 percent to $3.18, one of three advances in the Dow average, as Congress prepared to consider aid to the auto industry and Germany’s government studied assistance for the company’s Opel unit.
Lowe’s Cos. gained 4.2 percent to $18.99. The second-largest U.S. home-improvement retailer posted third-quarter profit that fell less than analysts estimated after it reduced spending. Lowe’s also forecast full-year earnings that exceed some analysts’ estimates.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
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