By Lynn Thomasson
Nov. 6 (Bloomberg) -- U.S. stocks slid, sending the market
to its biggest two-day slump since 1987, after jobless claims
jumped and the shrinking economy crushed earnings at companies
from Blackstone Group Inc. to News Corp.
Blackstone, the largest private-equity firm, fell 12 percent
after posting the biggest quarterly loss in its 18 months as a
public company. News Corp. sank 16 percent after the media
company controlled by Rupert Murdoch said ad sales decreased.
Chevron Corp. fell 6.4 percent as oil tumbled to a 19-month low,
while an unexpected decrease in chain-store sales dragged down 25
of 27 shares in the S&P 500 Retailing Index.
``We're a long way from the end of the economic
challenges,'' said Mike Morcos, who helps manage $1 billion at
Old Second Wealth Management in Aurora, Illinois. ``Earnings next
year are going to be significantly lower and estimates are going
to continue to come down.''
The Standard & Poor's 500 Index fell 5 percent to 904.88,
extending its two-day loss to 10 percent. The Dow Jones
Industrial Average retreated 443.48 points, or 4.9 percent, to
8,695.79. The Russell 2000 Index of small U.S. companies declined
3.7 percent to 495.84. The MSCI World Index of 23 developed
markets lost 5.9 percent to 925.09.
The two-day tumble following Election Day wiped out more
than half of the market's rebound from a five-year low on Oct.
27. Both the S&P 500 and Dow average posted their biggest two-day
slides since plunging more than 24 percent as rising borrowing
costs helped spur the market crash of October 1987.
Europe Slides
BP Plc led a 5.6 percent retreat in Europe's benchmark index
even after the Bank of England unexpectedly cut its benchmark
interest rate by 1.5 percentage points to 3 percent to contain
damage from a recession. Switzerland's central bank and the
European Central Bank reduced their main lending rates by 50
basis points.
The S&P 500 is down 38 percent this year, poised for the
steepest annual retreat since 1937. The benchmark for U.S.
equities has plunged 42 percent since its record in October 2007
after the U.S. economy shrunk in two of the last four quarters.
The VIX, as the Chicago Board Options Exchange Volatility
Index is known, climbed 17 percent to 63.68. The measure tracks
the cost of using options as insurance against declines in the
S&P 500.
``It's just been a steady, steady sell,'' said Alan Gayle,
the Richmond, Virginia-based senior strategist at Ridgeworth
Investments, which oversees about $70 billion. ``The pain and
frustration and anxiety of these volatile moves from one day to
the next has discouraged a lot of investors to move to the
sidelines.''
Lost Jobs
About 481,000 workers filed initial jobless claims last
week, the Labor Department said today in Washington, exceeding
the 477,000 projected by economists surveyed by Bloomberg News.
The number of people staying on benefit rolls was the most since
February 1983.
A report tomorrow will probably show U.S. employers
eliminated jobs in October for a 10th consecutive month, based on
economists' estimates.
Earnings at companies in the S&P 500 that have reported
third-quarter results fell 9.2 percent on average, Bloomberg data
show. Analysts expect full-year profits to drop 7.7 percent,
according to a compilation of analysts' estimates.
S&P 500 energy companies lost 6.1 percent as a group, as oil
declined for the third time this week. Crude for December
delivery retreated 6.9 percent to $60.77 a barrel, the lowest
settlement since March 2007.
Exxon Mobil, the world's largest oil company, tumbled $3.73
to $69.96, while Chevron Corp. slid 6.4 percent to $70.11.
Tech Slump
Cisco Systems Inc. declined 2.6 percent to $16.94. The
biggest maker of networking equipment forecast the first revenue
drop in five years because of the financial crisis.
Advanced Micro Devices Inc. tumbled 11 percent to $3.17. The
second-largest maker of personal-computer processors plans to cut
500 jobs, about 3 percent of the workforce, as part of its effort
to return to profitability.
Technology companies in the S&P 500 lost 5.4 percent
collectively. Dell Inc., Intel Corp. and Hewlett-Packard Co. fell
more than 5 percent.
Amazon.com Inc. sank 9.2 percent to $47.22. The largest
Internet retailer was cut to ``hold'' from ``buy'' at Citigroup
Inc., which noted the shares' surge of as much as 36 percent
since third-quarter results and concerns consumer spending will
slow.
GM's Survival
General Motors Corp. had the steepest decline in almost a
month, tumbling 14 percent to $4.80. The largest U.S. automaker
is focused on winning government aid to survive through 2009, not
to help a merger with Chrysler LLC, as it uses cash faster than
it forecast, people familiar with the plans said. GM plans to
give an update on liquidity when it reports third-quarter results
tomorrow.
Tyco Electronics Ltd. fell the most in more than a year,
slumping 12 percent to $16.78. Fiscal fourth-quarter profit slid
55 percent on restructuring costs and the company forecast a
``significant'' drop in sales and earnings this period.
News Corp.'s Class A shares tumbled $1.53 to $8.26. Fiscal
2009 profit will drop in the ``low to mid teens'' in percentage
terms, the company said after previously forecasting a gain of 4
percent to 6 percent.
Financial stocks in the S&P 500 fell 6.7 percent as a group,
led lower by Bank of America Corp. and Wells Fargo & Co. The
group is down 52 percent in 2008 as the slowing economy raises
concern banks will be hit by more bad loans after the subprime
mortgage market's collapse led to $690 billion in credit losses
worldwide.
Blackstone's Loss
Blackstone tumbled $1.05 to $7.55 after the financial crisis
eroded the value of the businesses and real estate it has
acquired, triggering a quarterly loss excluding items of $502.5
million. Blackstone had been expected to break even, based on the
average estimate of seven analysts in a Bloomberg survey.
Wells Fargo declined 9.2 percent to $28.77 after the biggest
bank on the U.S. West Coast said it plans to sell stock to fund
the purchase of Wachovia Corp. The bank also said losses from the
acquisition will be less than previously expected.
The bank, which disclosed the share offering yesterday in a
statement, had said it would raise as much as $20 billion to fund
the deal. That was before the Treasury said it was buying $25
billion of Wells Fargo's preferred shares.
Libor Declines
The slump in financials came even as the London interbank
offered rate, or Libor, for three-month loans in dollars dropped
12 basis points to 2.39 percent today, the lowest level since
November 2004, according to the British Bankers' Association.
Las Vegas Sands Corp., billionaire Sheldon Adelson's casino
company, posted the biggest drop since becoming a publicly traded
company with a 33 percent plunge to $7.85 after saying it may
default on debt and face bankruptcy.
Big Lots Inc. plunged 26 percent to $17.31 for the steepest
decline in the S&P 500. The largest U.S. seller of overstocked
and discontinued items said third-quarter profit may be below its
prediction.
October same-store sales fell 0.9 percent at U.S. chain
stores, the first drop in seven months, and declined 4.2 percent
excluding Wal-Mart, the International Council of Shopping Centers
said. Economists surveyed by Bloomberg had projected a 0.7
percent increase.
Excluding the effect of the shifting Easter holiday, it's
the first decline since at least 2000, according to research firm
Retail Metrics LLC.
Grocers Gain
Whole Foods Market Inc. climbed 1.7 percent to $10.48. The
largest U.S. natural-foods grocer received a $425 million equity
investment from Leonard Green & Partners LP.
Kroger Co., the biggest U.S. supermarket chain, added 1.1
percent to $26.99. Safeway Inc., the third-largest, rose 2
percent to $22.03.
Analysts are lowering fourth quarter and 2009 profit
forecasts for U.S. companies as third-period results miss
projections at the highest rate in almost 11 years.
Companies in the S&P 500 may see fourth-quarter earnings
advance 15 percent, down from 42 percent projected at the end of
August, according to a Bloomberg survey of analysts. Profits in
2009 may grow 13 percent, analysts say, compared with the 24
percent predicted two months ago.
To contact the reporter on this story:
Lynn Thomasson in New York at
lthomasson@bloomberg.net.
