U.S. Stocks Slide to Five-Year Lows as Banks, Carmakers Tumble

By Eric Martin

Nov. 19 (Bloomberg) -- U.S. stocks sank and benchmark indexes slid to their lowest levels since 2003 on growing concern over the health of the financial system and survival of the nation's car industry.

Citigroup Inc. tumbled 23 percent to $6.40, a 13-year low, on a plan to buy $17.4 billion of troubled investment-fund assets. General Motors Corp. slid 9.7 percent to its lowest price since the 1940s, while Ford Motor Co. lost 25 percent. Fourteen companies in the Standard & Poor's 500 Index fell 20 percent or more as government data signaled the recession is deepening and expectations grew that insurers will post more investment losses.

``Hideous day,'' said Bill Stone, who oversees $56 billion as chief investment strategist at PNC Wealth Management in Philadelphia. ``It's hard to put a basement on this thing.''

The S&P 500 plunged 6.1 percent to 806.58 and extended its 2008 retreat to 45 percent, poised for its worst year since 1931. The Dow Jones Industrial Average lost 427.47 points, or 5.1 percent, to 7,997.28. The Nasdaq Composite Index decreased 6.5 percent to 1,386.42. Thirty stocks fell for each that rose on the New York Stock Exchange, where 1.6 billion shares changed hands, 8.6 percent more than the three-month average.

The retreat in the U.S. followed declines in Europe and Asia as concern mounted the economic slowdown will cut profits at financial firms and commodity producers. Federal Reserve policy makers last month predicted the U.S. economy will contract through the middle of 2009, with some prepared to cut interest rates further in response, according to a record of their meeting released today.

Stocks Slide, Bonds Gain

Both the Dow and the S&P 500 retreated to their lowest levels since March 2003, while the Nasdaq slid to its lowest since April of that year.

Treasuries rose, led by longer-term securities, as investors sought the relative safety of government debt following the biggest drop in consumer prices on record. The difference between yields on 10-year Treasury Inflation Protected Securities and conventional notes, which reflects the outlook for consumer prices, was 38 basis points, near the least since Bloomberg began tracking the data in 1998.

Citigroup, which was surpassed by U.S. Bancorp today as the nation's fourth-largest bank by market value, retreated to its lowest price since 1995, three years before Citicorp Inc.'s merger with Sanford ``Sandy'' Weill's Travelers Group Inc.

SIV Slump

Citigroup said the value of the assets it agreed to buy from structured investment vehicles it advises fell from $21.5 billion as of Sept. 30, reflecting market declines of $1.1 billion and $3 billion in debt that matured or was sold. SIVs, which Citigroup invented in 1988, emerged 15 months ago as one of the first major strains in credit markets rocked by record high foreclosures on subprime mortgages.

Bank of America Corp., the lender that's buying Merrill Lynch & Co., dropped $2.13, or 14 percent, to $13.06. Goldman Sachs Group Inc. dropped $6.85, or 11 percent, to $55.18, the lowest close since the company's initial public offering in 1999.

The S&P 500 Financials Index tumbled 12 percent to a 13- year low as all 84 of its companies retreated. JPMorgan Chase & Co., the biggest U.S. bank by market value, lost $3.67, or 11 percent, to $28.47, its lowest closing price since 2003.

Lincoln National Corp. plunged 40 percent, the steepest decline in the S&P 500, to $7.31. The Philadelphia-based life insurer said it expects a charge of as much as $300 million because of declining equity markets last month. Insurers in the S&P 500 lost 11 percent collectively.

Even Buffett

Warren Buffett's Berkshire Hathaway Inc., which owns the insurers Geico Corp. and General Re, dropped 12 percent to $84,000 for its steepest plunge since at least 1985.

Homebuilders across S&P indexes tumbled 11 percent as a group, led by a 24 percent plunge in Meritage Homes Corp.

U.S. builders in October broke ground on the fewest new homes and obtained permits for future construction at the lowest levels on record, signs the housing slump may extend into a fourth year.

A bigger-than-forecast 1 percent drop in the consumer price index was triggered by a plunge in fuel costs and discounts on automobiles and clothing to entice consumers amid a weakening economy. Excluding food and energy, so-called core prices unexpectedly fell for the first time since 1982.

Carmakers Make Case

General Motors retreated 30 cents to $2.79. Chief Executive Officer Rick Wagoner and fellow auto-industry leaders are urgently seeking a government bailout package to stem a collapse in the U.S. auto industry.

Ford, the second-biggest U.S. automaker, dropped 42 cents, or 25 percent, to $1.26.

Car company executives made their plea for government aid for a second day as Senate Republican leader Mitch McConnell pressed lawmakers to expedite $25 billion in previously approved auto loans. Support has waned for a Democratic plan to help the automakers with funds from the recently approved $700 billion bank-rescue fund. That idea is opposed by President George W. Bush and Senate Republicans, making it unlikely there are enough votes to overcome a presidential veto.

The cost of protecting corporate bonds from default rose to near a record on concern automakers won't get a bailout in time to prevent them from failing.

`Soap Opera'

``The continuing soap opera that's playing out in Washington with the automobile manufacturing management testifying today before Congress is sowing further uncertainty,'' said Marshall Front, who oversees $700 million as chairman of Front Barnett Associates in Chicago. ``I think it's probably preoccupying most people at this point.''

The S&P 500 has dropped 48 percent from its 2007 record as earnings for companies in the index decreased for five straight quarters and worldwide writedowns and credit losses reached $966 billion in the worst financial crisis since the Great Depression.

Profits fell 17 percent on average at companies in the index that have reported third-quarter results, according to Bloomberg data. Analysts expect a 9.5 percent decline in full- year earnings, based on estimates compiled by Bloomberg.

CA Inc., one of just seven S&P 500 companies to advance, added 3 cents to $15.30. The second-largest maker of software for mainframe computers was boosted to ``strong buy'' from ``outperform'' by Raymond James Financial Inc. analyst Michael Turits, who said the company is ``well positioned'' amid an economic slowdown.

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.