By Michael Patterson
May 5 (Bloomberg) -- U.S. stocks fell for the first time in three days after Microsoft Corp. dropped a $50 billion bid for Yahoo! Inc. and Countrywide Financial Corp. plunged on concern its suitor will back out as well.
Yahoo, the most-visited Web site, posted its biggest fall since July 2006 as analysts advised selling the shares. Countrywide, the mortgage lender whose debt was cut to junk by Standard & Poor's last week, tumbled after Friedman Billings Ramsey & Co. said Bank of America Corp. should abandon or reduce its $4 billion takeover bid. Lower-than-forecast earnings at Warren Buffett's Berkshire Hathaway Inc. sent 23 of 24 insurance companies in the S&P 500 Index lower.
The S&P 500 decreased 4.93 points, or 0.4 percent, to 1,408.97 at 10:41 a.m. in New York. The Dow Jones Industrial Average lost 81.99, or 0.6 percent, to 12,976.21. The Nasdaq Composite Index slipped 6.69, or 0.3 percent, to 2,470.30. Almost five stocks fell for every three that rose on the New York Stock Exchange.
``We'll see further conservatism on the part of buyers in the acquisition market,'' John Carey, who helps oversee about $13 billion as a portfolio manager at Pioneer Investment Management in Boston, said in an interview on Bloomberg Television. ``Investors are going to be more demanding'' on earnings, he said.
Options traders are paying 63 percent more to protect against a drop in the S&P 500 than to bet on a gain, the widest difference since at least 2005, according to Bloomberg data compiled last week.
Stocks briefly pared losses today after the Institute for Supply Management said service industries in the U.S. unexpectedly expanded in April, signaling the damage from the housing slump and credit crisis may be dissipating.
Yahoo Tumbles
Yahoo, the Web company that spent three months fighting a takeover by Microsoft, tumbled $5.18, or 18 percent, to $23.49. The world's largest software maker said this weekend it walked away when Yahoo demanded $37 a share. Microsoft had increased its $44.6 billion bid by about $5 billion to $33 a share. Yahoo shares were cut to ``sell'' at Citigroup Inc. and other firms.
Microsoft shares added 82 cents to $30.06. Google, owner of the most-used Internet search engine, climbed $11.58 to $592.87.
Berkshire Hathaway slid $2,600, or 2 percent, $131,000. Buffett's company said profit declined as falling rates cut returns from insurance operations and the company marked down the value of derivative contracts. Operating earnings, which exclude investment losses, were $1,247 a share, lagging behind the $1,430 average analyst estimate compiled by Bloomberg.
Countrywide Drops
Countrywide lost 57 cents to $5.41. Bank of America will probably reduce its per-share offer to the ``$0 to $2 level'' from about $7, Friedman Billings Ramsey analyst Paul Miller wrote in a research note. The second-biggest U.S. bank by assets may have to write down the value of Countrywide's loans by $20 billion to $30 billion when it closes the takeover deal, Miller wrote. Bank of America shares declined 43 cents to $39.36.
Ingersoll-Rand Co. fell 96 cents to $44.03 after Morgan Stanley downgraded the refrigeration-equipment company to ``underweight'' from ``equal-weight.'' Analysts Robert Wertheimer and Mathew Schneider said in a note to clients that earnings may be at risk at Trane Inc., the air-conditioner maker being bought by Ingersoll-Rand, because of rising commodity prices and a weakening economy.
Sprint Nextel Corp., the third-biggest U.S. mobile-telephone carrier, climbed 51 cents to $8.40 amid reports that Deutsche Telekom AG is analyzing a possible takeover offer.
Sprint Speculation
A combination could make the German company's T-Mobile USA unit the biggest wireless company in the U.S., the Wall Street Journal said yesterday. Sprint's share-price drop and the strong euro make the transaction a bargain, Der Spiegel reported over the weekend, without saying how it got the information.
Deutsche Telekom spokesman Andreas Leigers and Sprint spokesman James Fisher both declined to comment on ``rumors.''
Former Federal Reserve Chairman Alan Greenspan said the U.S. has slipped into an ``awfully pale recession'' and may continue to languish for the rest of the year. Greenspan spoke in an interview with Bloomberg News the day before the Federal Open Market Committee's April 30 statement, where it dropped a previous reference to ``downside'' risks to growth and noted ``uncertainty'' about the outlook for inflation.
U.S. stocks rose last week as a better-than-forecast jobs report and the $23 billion takeover of Wm. Wrigley Jr. Co. pushed the S&P 500 to a four-month high.
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