U.S. Stocks Drop, Completing Longest Losing Streak Since 2002

-- U.S. stocks fell this week, capping the fourth-straight monthly decline, after analysts boosted estimates for losses at banks and speculation increased that rising unemployment and lower manufacturing are pushing the economy into recession.

JPMorgan Chase & Co. and Merrill Lynch & Co. dropped after UBS AG and Punk Ziegel & Co. cut profit estimates for U.S. financial firms. American International Group Inc. retreated after the world's largest insurer reported its biggest-ever loss Because of writedowns from the subprime-mortgage market's collapse. UBS said bank losses may reach $600 billion.

The Standard & Poor's 500 Index slipped 1.7 percent to 1,330.63 this week, extending its February decline to 3.5 percent. The Dow Jones Industrial Average fell 0.9 percent to 12,266.39. The four-month losing streaks for both measures are the longest since 2002. The Nasdaq Composite Index declined 1.4 percent to 2,271.48.

``The stock market has begun to discount a recession, and that's unfolding,'' Ben Halliburton, who oversees $540 million as chief investment officer at Tradition Capital Management, said during an interview with Bloomberg Television in New York.

Nine of 10 industries in the S&P 500 declined after reports showed the U.S. economy grew less in the fourth quarter than economists forecast and business activity fell to the lowest since 2001. Investors speculated that five interest-rate cuts by the Federal Reserve since September will fail to prevent a contraction in the world's largest economy.

$103.05 Oil

Fed Chairman Ben S. Bernanke signaled this week that the central bank is prepared to lower rates further even as rising commodity prices boost inflation. Crude oil reached a record $103.05 a barrel in New York yesterday. Bernanke signaled the decline in the dollar may help the economy, pushing the currency to the lowest level in three years versus the yen and the weakest ever against the euro.

JPMorgan lost 7.5 percent to $40.65. Merrill erased 6.6 percent to $49.56. UBS's banking analysts joined peers at least six other brokerages who have cut profit estimates on expectations of further subprime writedowns.

Financials slumped 4.9 percent for the biggest weekly loss among S&P 500 industry groups. Banks and brokers stand to lose $350 billion, according to UBS estimates. They have so far disclosed more than $181 billion of writedowns and credit losses, based on Bloomberg data.

AIG, Sprint

AIG tumbled 4.1 percent to $46.86. The insurer posted a fourth-quarter net loss of $5.29 billion, or $2.08 a share, after an $11.1 billion writedown of derivatives linked in part to subprime mortgages. The executive running the financial products unit is stepping down, the company said.

Sprint Nextel Corp. erased 20 percent to $7.11 for the steepest loss in the S&P 500. The third-biggest U.S. wireless carrier reported a record $29.5 billion loss and said customer defections this quarter will likely match losses for all of 2007.

Government reports showing slower-than-expected economic growth and rising jobless claims also pushed stocks lower this week. Gross domestic product grew by 0.6 percent last quarter, less than the 0.8 percent estimated by economists in a Bloomberg survey, and initial jobless claims climbed by a more-than- forecast 19,000 to 373,000 last week.

Little, No Growth

``We're in a little-to-no-growth economic environment,'' said Chris Hagedorn, a Cincinnati-based portfolio manager at Fifth Third Asset Management, which oversees about $22 billion. ``We actually expect the market to be choppy in the near term, but we do think there's potential for market recovery toward the latter half of the year.''

The Russell 2000 Index slipped 1.3 percent to 686.18 this week, outperforming the S&P 500, whose members have a median market value 22 times larger than the small-cap benchmark.

Take-Two Interactive Software Inc. had the biggest gain in the Russell 2000, surging 53 percent to $26.50, after Electronic Arts Inc. offered to buy its rival. Take-Two makes the ``Grand Theft Auto'' series.

The yield on two-year Treasury notes fell to 1.62 percent, the lowest since March 2004. The 10-year note's yield fell to 3.51 percent.

Reports next week on manufacturing and employment will give investors more clues on the outlook for U.S. growth and rates. The Institute for Supply Management may say manufacturing contracted in February, according to economists surveyed by Bloomberg. The Labor Department will probably report that the unemployment rate rose by 0.1 percentage point to 5 percent in February, economists said.

Companies in the S&P 500 scheduled to report earnings next week include Costco Wholesale Corp., the largest U.S. warehouse chain, and H&R Block Inc., the nation's biggest tax preparer.