Nov. 9 -- U.S. stocks fell to the lowest levels in two months after Qualcomm Inc. trimmed its profit forecast and analysts said earnings at 3M Co. and Target Corp. will be reduced by a slowdown in consumer spending.
Qualcomm, the second-biggest maker of mobile-phone chips, helped send technology shares to the steepest weekly drop in five years. 3M, the maker of 50,000 products, tumbled to a six-month low and Target led retailers to the eighth decline in nine days. Fannie Mae slid after saying mortgage-related losses increased. The fall in stocks triggered a rally in Treasuries, sending three-month yields to the lowest in almost three months.
The Standard & Poor's 500 Index lost 21.07, or 1.4 percent, to 1,453.7, trimming its gain to 3 percent since the Federal Reserve cut its discount rate on Aug. 17. The Dow Jones Industrial Average slumped 223.55, or 1.7 percent, to 13,042.74. The Nasdaq Composite Index declined 68.06, or 2.5 percent, to 2,627.94. About three stocks fell for every one that rose on the New York Stock Exchange.
``It's going to take some time for these problems to work their way through the financial system,'' said Matt DiFilippo, a Pittsburgh-based senior portfolio manager at Stewart Capital Advisors LLC, which has about $1 billion under management. ``They might provide a cap on the market, particularly when you start to see an overflow into what most would believe are non-related sectors.''
Weekly Loss
Qualcomm's forecast added to concern spurred yesterday by Cisco Systems Inc. that analysts' earnings estimates for technology companies are too high. The S&P 500 posted its biggest two-week drop since August after banks and brokerages wrote down holdings of debt securities and set aside more money for bad loans.
The S&P 500 fell 3.7 percent this week and the Dow average lost 4.1 percent, the most since July, while the Nasdaq tumbled 6.5 percent, its biggest weekly drop since April 2002.
Qualcomm dropped $1.66, or 4.2 percent, to $38.10, its steepest tumble since Aug. 15. The company lowered its profit forecast for fiscal 2008 by as much as 30 cents a share to as little as $2.03. Analysts in a Bloomberg survey had estimated earnings of $2.14 a share. The company's failure to sign a new agreement with Nokia Oyj, the world's largest maker of phones, is hurting licensing fees, which account for about three-quarters of profit.
Technology Slump
Qualcomm's report dragged down other computer-related stocks. The S&P 500 Information Technology Index declined 3.2 percent today, bringing its loss to 8.9 percent for the week. The gauge is still up 12 percent this year, compared with a 2.5 percent gain in the broader S&P 500.
Cisco, the world's biggest networking-equipment maker, fell $1.05 to $28.58 after a 9.5 percent tumble yesterday. Apple Inc., the maker of Macintosh computers and iPod music players, dropped $10.10 to $165.37. Google Inc., the world's most popular Internet search engine, fell $29.87 to $663.97. International Business Machines Corp., the biggest computer-services company, lost $5.86 to $100.25.
Earnings at technology companies in the S&P 500 may climb 10 percent this year and 24 percent next year, according to the average of analysts' estimates compiled by Bloomberg today. The 2008 profit growth estimate is the highest among 10 industry groups.
Analysts have reduced their earnings estimates for companies in other industries in the past month. They now expect profits at all S&P 500 members to rise 4.7 percent on average this quarter, down from a 10.3 percent estimate in October.
3M, Retailers
3M slumped $3.32 to $79.51, its lowest since April. Goldman, Sachs & Co. said investors should sell the shares because a slowdown in U.S. consumer spending next year may hurt earnings. Analyst Deane Dray also said productivity gains won't offset declining profits from its optical-film business. Optical film is used in liquid-crystal-display televisions and laptop screens.
Retailers in the S&P 500 dropped 3.2 percent as a group after Bear Stearns & Co. analyst Christine Augustine reduced her earnings estimates for chain stores including Target, Macy's Inc., Family Dollar Stores Inc. and Kohl's Corp., saying a weaker economy is hurting demand from low-income consumers.
Target, the second-largest U.S. discount chain, declined $2.51 to $56.19. Macy's, the No. 2 department store company, lost $1.40 to $28.49. Family Dollar retreated 70 cents to $22.53, while Kohl's lost $1.58 to $47.58. J.C. Penney Co. dropped $3.38 to $46.89 after Augustine downgraded the stock to ``peer perform'' from ``outperform.''
Fannie Mae fell 80 cents to $49. The biggest source of money for U.S. home loans said its third-quarter loss more than doubled to $1.39 billion as a deepening housing slump increased mortgage delinquencies. The net loss was caused by a $2.24 billion decline in the value of derivative contracts and $1.2 billion in credit losses among the $2.7 trillion of mortgage assets Fannie Mae owns or guarantees.
Global Decline
Benchmark indexes retreated in Europe and Asia amid speculation Barclays Plc and Mizuho Financial Group Inc. will report losses on subprime-related assets.
The Morgan Stanley Capital International Asia Pacific Index slipped 0.1 percent. Europe's Dow Jones Stoxx 600 Index fell 1.6 percent on concern Barclays, Britain's third-biggest lender, may announce a writedown of as much as 10 billion pounds ($21 billion) on its assets, traders said. Barclays denied the speculation.
A gauge of financial shares in the S&P 500 gained for a second day after plunging to the lowest in two years on Nov. 7. It was the only group to advance among the 10 main industries in the S&P 500.
'Toe in the Water'
``This group has been ravaged this week so it's not surprising to see a little bounce,'' said Andy Brooks, head equity trader at T. Rowe Price Group Inc. ``If you want to put your toe in the water, this is the sector.''
Citigroup Inc. snapped an eight-day losing streak, gaining 20 cents to $33.10. The largest U.S. bank by assets is being urged by some analysts and shareholders to break off and sell its brokerage, investment banking and retail operations, the Telegraph reported, citing analysts. Citigroup executives have said they don't intend to sell any part of the business, the Telegraph reported.
MGIC Investment Corp. and PMI Group Inc., the two largest U.S. mortgage insurers, rose after insurer Old Republic International Corp. disclosed it became the biggest investor in each company. MGIC gained $2.94, or 16 percent, to $21.30 for the largest advance in the S&P 500. PMI jumped $3.77 to $14.88.
Economic Reports
A private report today said consumer confidence fell in November to the lowest in two years as rising fuel costs and falling home prices left Americans with less cash. The Reuters/University of Michigan preliminary sentiment index fell to 75 from 80.9 at the end of October, the second-lowest reading of the past 15 years and just above the post-Hurricane Katrina reading of 74.2 on October 2005.
The U.S. trade deficit unexpectedly narrowed in September by 0.6 percent to $56.5 billion, the smallest since May 2005, the Commerce Department said. Exports reached new highs for a seventh straight month as a slumping dollar and global economic growth boosted demand for American products.
Prices for goods imported into the U.S. rose 1.8 percent in October, the most in 17 months and more than economists forecast, as oil neared a record. Prices excluding petroleum rose 0.5 percent, the Labor Department said.
Treasuries rose and yields on the shortest-term securities touched the lowest level in almost three months as concern over subprime-mortgage losses drove investors to the safety of government debt.
Traders increased bets the Fed will reduce its benchmark rate a third time this year. The odds of a quarter-percentage point rate cut to 4.25 percent at the central bank's Dec. 11 policy meeting are 98 percent, up from 90 percent yesterday, futures contracts show.
The Russell 2000 Index, a benchmark for companies with a median market value of $610.4 million, dropped 1.1 percent to 772.38. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, fell 1.4 percent to 14,709.29. Based on its decline, the value of stocks decreased by $265.5 billion.
3M Co. (MMM US)
Apple Inc. (AAPL US)
Cisco Systems Inc. (CSCO US)
Citigroup Inc. (C US)
Family Dollar Stores Inc. (FDO US)
Fannie Mae (FNM US)
Google Inc. (GOOG US)
International Business Machines Corp. (IBM US)
J.C. Penney Co. (JCP US)
Kohl's Corp. (KSS US)
Macy's Inc. (M US)
MGIC Investment Corp. (MTG US)
PMI Group Inc. (PMI US)
Qualcomm Inc. (QCOM US)
Target Corp. (TGT US)
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