April 8 (Bloomberg) -- U.S. stocks fell the most in seven days after the first signs of quarterly earnings disappointed investors, Washington Mutual Inc. slashed its dividend and pending home sales dropped more than forecast.
Washington Mutual led financial shares lower after the largest savings and loan cut its payout by 93 percent to conserve cash as it forecast a $1.1 billion loss in the first quarter. Advanced Micro Devices Inc., the second-biggest maker of personal-computer chips, dropped on a 22 percent slump in sales. Lennar Corp., Pulte Homes Inc. and KB Home led declines in all 15 homebuilders in Standard & Poor's indexes.
The S&P 500 lost 6.73 points, or 0.5 percent, to 1,365.81 at 11:52 a.m. in New York. The Dow Jones Industrial Average slid 41.52, or 0.3 percent, to 12,570.91. The Nasdaq Composite Index declined 12.83, or 0.5 percent, to 2,352. Seven stocks dropped for every five that rose on the New York Stock Exchange.
``We'll be lucky to see earnings be flat for the year and we'll probably see earnings decline,'' Steven Bleiberg, who helps manage about $6 billion as head of global investment strategy at Legg Mason Asset Management in New York, said in an interview with Bloomberg Television. ``Ultimately you've got to have earnings growth, that's the driver, and I just don't see it happening. There are so many negative signs out there.''
Earnings Watch
First-quarter earnings at S&P 500 companies probably fell by an average 11.3 percent from a year earlier, according to analyst estimates compiled by Bloomberg. The decline would mark the third straight quarterly drop in profits, the longest stretch in six years.
Advanced Micro Devices sank 26 cents, or 4.1 percent, to $6.08 after the company said first-quarter revenue fell to about $1.5 billion and announced plans to cut 10 percent of its staff.
``Business weakened during the month of March partly due to weaker desktop demand but also due to share losses to Intel,'' Merrill Lynch & Co. analysts including Srini Pajjuri wrote in a report today. ``Management has been banking on share gains to achieve breakeven'' in the second half of 2008.
Washington Mutual dropped $1.35, or 10 percent, to $11.80. The company said it may post a $1.1 billion loss in the first quarter and plans to cut its quarterly dividend to 1 cent, from 15 cents, preserving $490 million of capital annually. The savings and loan will receive $7 billion from a group led by David Bonderman's TPG Inc. to replenish capital as it confronts more losses tied to subprime mortgages.
Housing Slump
Lennar lost $1.24 to $20.57. Pulte slid 81 cents to $15.05. KB Home retreated $1.34 to $26.
The National Association of Realtors' index of signed purchase agreements decreased 1.9 percent to 84.6, the lowest reading since records began in 2001, the group said. The drop follows a revised 0.3 percent increase in January.
Intel Corp. lost 38 cents, or 1.8 percent, to $21.37, the second-steepest drop in the Dow average. The world's largest computer-chip maker had its share-price forecast and 2008 profit estimates cut at Jefferies & Co., which cited ``softer'' first- quarter sales. International Business Machines Corp., the biggest computer-services company, retreated 61 cents to $115.70.
Novellus Systems Inc., the maker of equipment that helps turn silicon wafers into computer chips, slid $1.81 to $22. Novellus said earnings in the three months ended March 29 will be lower than predicted by the company in February. Net income will be 15 cents to 17 cents a share, compared with a forecast of 21 cents to 24 cents given by the company on Feb. 28, Novellus said today.
`Still Too High'
``Our view is that earnings estimates are still too high,'' Damon Barglow, who helps oversee $1.7 billion as the Boston- based managing director at Eastern Investment Advisors, said in an interview with Bloomberg Television. ``We still think there's going to be some negative news here and we would not be surprised to see a pullback before we move higher.''
Fannie Mae and Freddie Mac, the biggest sources of money for U.S. home loans, gained after Lehman Brothers Holdings Inc.'s estimate that the stocks will soar to $45 or more overshadowed Goldman Sachs Group Inc.'s forecast that the shares will tumble to $16 or less.
The companies ``have reached an important inflection point,'' Lehman analyst Bruce Harting said, boosting the shares to ``overweight.'' Harting was the top-ranked consumer finance analyst in Institutional Investor's annual survey for 2007.
Goldman Sachs analysts led by James Fotheringham reiterated their ``sell'' recommendation, predicting credit losses at the companies will ``increase rapidly.''
Fannie, Freddie
Fannie Mae will have $15.2 billion in credit losses through 2010, on top of $4.1 billion already reported, Goldman said, and Freddie Mac will have $10.6 billion on top of $3.7 billion.
Fannie Mae added 81 cents to $30.66 and Freddie Mac rose 49 cents to $27.09
American Express Co., the largest U.S. credit-card lender, gained 59 cents to $47.14 after Goldman Sachs Group Inc. raised the stock to ``buy'' from ``neutral'' and upgraded brokers and asset managers to ``attractive.''
Former Federal Reserve Chairman Alan Greenspan said today the drop in U.S. home prices will probably end ``well before'' early next year as the number of houses on the market diminishes, aiding an economic rebound. Greenspan added that the extent of damage stemming from the collapse of the subprime- mortgage market won't be known for months and described the credit contraction as the worst in 50 years. He spoke at a conference in Tokyo.
The Fed releases minutes of its March 18 policy meeting at 2 p.m. Washington time. In the first 11 weeks of this year, the central bank cut the benchmark lending rate 2 percentage points, the fastest drop in two decades.
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