U.S. Stocks Drop, Led by GM; Exxon Falls on $25 Crude Forecast

By Elizabeth Stanton and Jeff Kearns

Dec. 4 (Bloomberg) -- U.S. stocks fell for the first time in three days, pushed down by concern General Motors Corp. may file for bankruptcy and a plunge in energy shares following Merrill Lynch & Co.’s prediction that oil will hit $25 a barrel.

GM lost 16 percent after a person familiar with the matter said the largest U.S. automaker is exploring a reorganization with workers, creditors and lenders. Southwestern Energy Co., EOG Resources Inc. and Exxon Mobil Corp. slumped, sending the Standard & Poor’s 500 Energy Index to a 6.2 percent decline. Apple Inc. slipped 4.7 percent as Nokia Oyj said the global mobile-phone market will shrink 5 percent or more next year.

The S&P 500 lost 2.9 percent to 845.22. The Dow Jones Industrial Average fell 215.45 points, or 2.5 percent, to 8,376.24. Indexes also dropped after the Labor Department said more Americans are collecting jobless benefits than at any time since 1982. Economists estimate a report tomorrow will show the unemployment rate increased to 6.8 percent, a 15-year high.

“As bad as you think it is, it’s worse,” said Diane Garnick, who helps oversee about $500 billion as an investment strategist at Invesco Ltd. in New York. “The chances of the economy turning around in the first half of 2009 are declining rapidly because unemployed people can’t spur economic growth.”

The S&P 500 has fallen 42 percent in 2008 as writedowns and losses at financial firms approach $1 trillion and more economists forecast that the U.S. recession will be one of the most severe in the post-World War II era. Today’s decline pared its rebound from an 11-year low on Nov. 20 to 12 percent.

New Lows

Sixteen companies in the S&P 500 fell to 52-week lows today. They included Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, and Campbell Soup Co. None reached new highs.

The Chicago Board Options Exchange Volatility Index added 4.8 percent to 63.64. The so-called VIX, which reached a record high of 80.86 on Nov. 20, measures the cost of using options as insurance against S&P 500 declines. The MSCI World Index of 23 developed markets retreated 1.8 percent to 844.58. The Russell 2000 Index of small U.S. companies fell 3.1 percent to 439.53.

“There’s a concern out there that this isn’t a recession, it’s the Great Depression II, or the Great Recession I,” said Kenneth Schapiro, president of Condor Capital Management, which oversees $500 million in Martinsville, New Jersey. “People have seen their retirement funds affected by what’s happened and are concerned about putting more capital in.”

GM fell 16 percent to $4.11. Chrysler LLC executives are also considering a pre-arranged bankruptcy filing, a person familiar with the companies’ internal discussions said.

‘Immediate’ Need

GM, Chrysler and Ford Motor Co. today renewed their plea for a combined $34 billion in federal aid as a deadlocked Congress showed no progress in deciding how to aid them. GM Chief Executive Officer Rick Wagoner said his company needs an “immediate” $4 billion, and $4 billion more next month.

Ronald Gettelfinger, president of the United Auto Workers union, told a Senate panel today that GM may fail this month without a cash infusion.

Southwestern Energy, an oil and natural gas producer, fell 15 percent to $26.34 as all 40 energy companies in the S&P 500 retreated. EOG Resources, the former oil and gas unit of Enron Corp., slid 14 percent to $68.79. Exxon, the world’s largest oil company, lost 3.4 percent to $76.27.

Crude oil tumbled 6.8 percent to $43.59 a barrel in New York, the lowest price since January 2005. It has plunged 70 percent since the closing record of $145.29 set in July and may fall below $25 next year if the recession that’s slashing fuel demand around the world spreads to China, Francisco Blanch, commodity strategist at Merrill Lynch, wrote in a report today.

First Drop Since 2001

Apple, maker of the iPhone mobile device as well as iPod music players and Macintosh computers, fell 4.7 percent to $91.41. Finland-based Nokia, the largest maker of mobile phones, forecast the first drop in industry sales since 2001 and lowered its estimate for industry revenue in the current quarter.

Global smartphone sales growth slowed to 11.5 percent in the third quarter from a year earlier as consumers postponed replacement purchases, research firm Gartner Inc. said today. Research In Motion Ltd., the maker of the BlackBerry, said this week that quarterly subscriber gains fell short of its forecast.

Wal-Mart Stores Inc. gained 1.3 percent to $55.11. The world’s largest retailer said November sales exceeded its projection, spurred by discounts on groceries, consumer electronics and Christmas decorations.

‘Good Sign’

“Consumers are still responsive to price; that’s a good sign,” said Julie Van Cleave, who oversees $3 billion, including Wal-Mart shares, at Deutsche Bank AG unit DWS Investments in Milwaukee. “They’re going to fewer stores but making larger purchases.”

Other chain stores rallied on November sales that beat estimates. Nordstrom Inc., the U.S. department store operator with more than 100 namesake locations, jumped 10 percent to $12.01. Office Depot Inc. added 15 percent to $2.17. Macy’s Inc., the second-biggest department store, climbed 6 percent to $7.83 after affirming its fourth-quarter sales forecast.

Homebuilders gained amid reports the Treasury Department is considering stepping up purchases of mortgage-backed securities to drive rates on some loans down to 4.5 percent. The average rate on 30-year fixed-rate loans dropped to 5.47 percent last week, the lowest level since 2005, according to the Mortgage Bankers Association.

D.R. Horton Inc., the largest U.S. homebuilder, advanced 8 percent to $7.82. Lennar Corp. added 10 percent to $8.50. Centex Corp. climbed 9 percent to $11.10. An index of homebuilders in the S&P 500 rose 6.6 percent to the highest level in a month.

Falling Sales

Merck & Co. dropped 5.5 percent to $25. The company said 2009 profit may decline amid falling sales of its Zetia and Vytorin cholesterol pills and weak international revenue.

Adobe Systems Inc. lost 9.3 percent to $20.44. The world’s largest maker of graphics and Web-design software forecast sales that missed analysts’ estimates, saying the economy has crimped spending. Adobe also plans to cut 600 jobs, amounting to about 8 percent of its staff.

The Labor Department said today that 4.09 million fired workers received government unemployment checks in the week ended Nov. 22, the most since December 1982 and more than economists estimated in a Bloomberg survey. Data to be released tomorrow are forecast to show U.S. payrolls shrank in November for the 10th straight month, sending the unemployment rate to 6.8 percent, the highest since 1993.

AT&T, DuPont Cuts

AT&T Inc., the largest U.S. phone company, and DuPont Co., the third-biggest U.S. chemical maker, said they will cut jobs to lower costs as the recession erodes profit.

AT&T lost 3.1 percent to $28.17. The company plans to cut 12,000 jobs, or about 4 percent of its workforce. DuPont rose 0.3 percent to $23.69 after saying it will cut about 2,500 jobs because the global recession is cutting demand for products such as auto paint and Tyvek weather wrap.

“Businesses are battening down the hatches,” Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, said in Bloomberg Television interview. “Job losses are going to continue to accelerate.”

To contact the reporters on this story: Elizabeth Stanton in New York at estanton@bloomberg.net; Jeff Kearns in New York at jkearns3@bloomberg.net.