Nov. 19 -- U.S. stocks fell, erasing last week's gain, after Goldman, Sachs & Co. told investors to sell shares of Citigroup Inc. and Lowe's Cos. cut its earnings forecast for the second time in two months.
Citigroup retreated after Goldman said credit-market losses may cause the biggest U.S. bank by assets to report $15 billion in writedowns over the next two quarters. Merrill Lynch & Co. and Morgan Stanley also slumped after Goldman cut its share- price estimate on both companies. Lowe's, the second-largest home-improvement retailer, tumbled the most in eight weeks after the housing slump caused a drop in profit.
The Standard & Poor's 500 Index lost 13.91, or 1 percent, to 1,444.83 at 10:19 a.m. in New York. The Dow Jones Industrial Average fell 102.83, or 0.8 percent, to 13,073.96. The Nasdaq Composite Index decreased 20.38, or 0.8 percent, to 2,616.86. The Dow Jones Transportation Average slid 69.77, or 1.5 percent, to 4,494.07, the lowest in 13 months. About seven stocks dropped for every one that rose on the New York Stock Exchange.
``Downgrades in the banking sector and issues with the retailers, all of these things are spooking the market right now,'' said Ed Peters, chief investment officer at PanAgora Asset Management in Boston, which manages $26 billion. ``We have to wait a little bit to be sure that all the news is out'' before buying shares of financial companies.
Lowe's report added to concern that retail sales growth this holiday shopping season may be the worst in at least five years and signal an economic contraction. The number of economists forecasting the U.S. will slip into recession almost doubled over the last two months, a survey by the National Association for Business Economics showed.
'More Pessimistic'
Citigroup slid 90 cents to $33.10. Goldman cut the largest U.S. bank by assets to ``sell'' from ``neutral'' and reduced its 2008 earnings per share estimate to $3.80 from $4.65.
``Given the dislocations in the credit markets, we have become more pessimistic on the group's outlook,'' New York-based analyst William Tanona wrote in a note today. Citigroup will write down $15 billion in CDOs in the next two quarters, Goldman said.
Merrill Lynch fell $1.11 to $55 after Goldman cut its price estimate 11 percent to $59 a share. Morgan Stanley retreated $1.03 to $51.87 after its price estimate was reduced 7.6 percent to $61 a share by the analyst.
Lowe's
Lowe's lost 95 cents, or 3.8 percent, to $24.06. Net income fell to $643 million, or 43 cents a share, from $716 million, or 46 cents, a year ago, Lowe's said. Revenue rose to $11.6 billion, trailing analysts' estimates.
The Dow transportation average declined for a fourth day to the lowest level since October 2006, dragged down by a 4.7 percent decline in YRC Worldwide Inc. Some investors view the transportation gauge as a harbinger of economic trends and say its decline may foretell drops in the Dow industrials.
Newmont Mining Corp., the world's second-largest gold producer, slipped 33 cents to $49.36, while Alcoa Inc. lost 66 cents to $35.65. Copper futures fell as inventories monitored in London rose to seven-month high, raising concern that demand may be slowing for the industrial metal.
U.S. stocks followed shares in Asia and Europe lower after Chinese regulators told banks to cool lending that has fueled the world's fastest economic expansion. The S&P 500 on Nov. 16 capped off its first weekly gain of November as investors speculated the worst of Wall Street's mortgage losses had been disclosed.
Recession Odds
Nine of 50 economists pegged the odds of a U.S. recession over the next 12 months at 50 percent or higher, according to a poll taken from Oct. 22 to Nov. 6. Just five of 46 held a similar view in September.
The China Banking Regulatory Commission said it's giving ``guidance'' to banks to cool lending that's already topped its goal of 15 percent growth this year and threatens to overheat the world's fastest-growing major economy.
Archer Daniels Midland Co. declined $1.28, or 3.4 percent, to $36.61. The world's largest grain processor may be too expensive given the uncertainty regarding its margins and profit in the next few quarters, Barron's reported, citing no one.
Eli Lilly & Co. declined 18 cents to $51.63. The world's biggest maker of psychiatric drugs may drop to $47 if its anti- clotting medication, Prasugrel, doesn't generate sales after winning approval, Barron's reported, citing Morgan Stanley analyst Jami Rubin.
Celgene, Yahoo
Celgene Corp. lost $1.57 to $63.33. The maker of thalidomide-based drugs for blood cancers will acquire Pharmion Corp. for $2.9 billion in cash and stock to gain a leukemia treatment that helped patients live longer in a study.
Yahoo Inc. rose 43 cents to $27.25. Merrill Lynch & Co. raised its recommendation on shares of the most-visited U.S. Web site to ``buy'' from ``neutral.'' The shares are at ``an attractive entry point'' as 2008 ``growth headwinds seem discounted in the stock,'' analysts Justin Post and Nat Schindler wrote in a note to investors.
Qualcomm Inc. climbed 44 cents to $41.80. The world's second-largest supplier of chips that run mobile phones was raised to ``overweight'' from ``neutral'' at JPMorgan Chase & Co.
The Morgan Stanley Capital International World Index lost 0.7 percent. Europe's Dow Jones Stoxx 600 Index fell 1.1 percent to 358.71, its lowest level in three months.
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