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21-05-2008, 04:41 AM

Its getting worse folks...

U.S. Stocks Drop on Credit Concern, Producer Prices; Banks Fall

By Eric Martin
May 20 (Bloomberg) -- U.S. stocks fell, dragging down the Standard & Poor's 500 Index from a four-month high, as analysts forecast more credit losses and faster inflation and record oil prices threatened to reduce profitability.

Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. led financial shares to a third straight decline as Oppenheimer & Co. analyst Meredith Whitney said banks may write off more than $170 billion of additional reserves by the end of 2009. American International Group Inc., the world's largest insurer, slid to the lowest level since 1998 on plans to raise more capital. Home Depot Inc. had its worst tumble in nine months after profit slumped 66 percent.

The S&P 500 lost 13.23 points, or 0.9 percent, 1,413.4, its biggest drop since May 7. The Dow Jones Industrial Average sank 199.48, or 1.5 percent, to 12,828.68. The Nasdaq Composite Index decreased 23.83, or 1 percent, to 2,492.26. More than two stocks retreated for each that rose on the New York Stock Exchange.

``There are still some serious credit issues that need to be worked through in a weakening economy driven by a weaker consumer,'' Leo Grohowski, who helps oversee $162 billion as chief investment officer at Bank of New York Mellon Wealth Management, told Bloomberg Television. ``Some of the liquidity fears that were really driving the market down have been minimized, but we are in the midst of a credit crunch.''

Inflation Concern

Seven of 10 industries in the S&P 500 dropped after the Labor Department reported a 0.4 percent gain in producer prices excluding food and fuel in April, twice as big as economists had forecast. A gauge of U.S. stock-market volatility rose the most in almost two weeks. Shares fell in Europe and Asia as record oil weighed on the outlook for earnings.

The S&P 500 is still 11 percent above its 19-month low reached March 10 after the Federal Reserve helped bail out U.S. banks and earnings at two-thirds of the companies in the index beat analysts' estimates.

JPMorgan lost $2.29, or 5 percent, to $43.70. Whitney, who correctly predicted on Oct. 31 that Citigroup Inc. would cut its dividend and has a ``perform'' rating on JPMorgan, lowered earnings estimates for the U.S. banking sector ``significantly.''

``The real harrowing days of the credit crisis are still in front of us and will prove more widespread in effect than anything yet seen,'' analysts including Whitney wrote in a research note.

21-05-2008, 04:41 AM	#198 (permalink)
bkkandrew Guest Posts: n/a	Its getting worse folks... U.S. Stocks Drop on Credit Concern, Producer Prices; Banks Fall By Eric Martin May 20 (Bloomberg) -- U.S. stocks fell, dragging down the Standard & Poor's 500 Index from a four-month high, as analysts forecast more credit losses and faster inflation and record oil prices threatened to reduce profitability. Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. led financial shares to a third straight decline as Oppenheimer & Co. analyst Meredith Whitney said banks may write off more than $170 billion of additional reserves by the end of 2009. American International Group Inc., the world's largest insurer, slid to the lowest level since 1998 on plans to raise more capital. Home Depot Inc. had its worst tumble in nine months after profit slumped 66 percent. The S&P 500 lost 13.23 points, or 0.9 percent, 1,413.4, its biggest drop since May 7. The Dow Jones Industrial Average sank 199.48, or 1.5 percent, to 12,828.68. The Nasdaq Composite Index decreased 23.83, or 1 percent, to 2,492.26. More than two stocks retreated for each that rose on the New York Stock Exchange. ``There are still some serious credit issues that need to be worked through in a weakening economy driven by a weaker consumer,'' Leo Grohowski, who helps oversee $162 billion as chief investment officer at Bank of New York Mellon Wealth Management, told Bloomberg Television. ``Some of the liquidity fears that were really driving the market down have been minimized, but we are in the midst of a credit crunch.'' Inflation Concern Seven of 10 industries in the S&P 500 dropped after the Labor Department reported a 0.4 percent gain in producer prices excluding food and fuel in April, twice as big as economists had forecast. A gauge of U.S. stock-market volatility rose the most in almost two weeks. Shares fell in Europe and Asia as record oil weighed on the outlook for earnings. The S&P 500 is still 11 percent above its 19-month low reached March 10 after the Federal Reserve helped bail out U.S. banks and earnings at two-thirds of the companies in the index beat analysts' estimates. JPMorgan lost $2.29, or 5 percent, to $43.70. Whitney, who correctly predicted on Oct. 31 that Citigroup Inc. would cut its dividend and has a ``perform'' rating on JPMorgan, lowered earnings estimates for the U.S. banking sector ``significantly.'' ``The real harrowing days of the credit crisis are still in front of us and will prove more widespread in effect than anything yet seen,'' analysts including Whitney wrote in a research note.