By Eric Martin
Jan. 15 (Bloomberg) -- The U.S. stock market resumed its January tumble after Citigroup Inc. reported a record loss, retail sales unexpectedly dropped and falling oil prices dragged down energy shares.
Citigroup, the largest U.S. bank, declined to a five-year low in New York Stock Exchange trading after cutting its dividend by 41 percent and writing off $18 billion for mortgage defaults. Chevron Corp., the second-biggest U.S. oil company, dropped the most in seven weeks. Apple Inc. slumped to the lowest in two months on the Nasdaq Stock Market after new products failed to impress investors.
The Standard & Poor's 500 Index lost 35.3, or 2.5 percent, to 1,380.95, marking its worst start since the first 10 trading days of 1978. The Dow Jones Industrial Average fell 277.04, or 2.2 percent, to 12,501.11, the fifth decline of more than 220 points this year. The Nasdaq Composite Index decreased 60.71, or 2.5 percent, to 2,417.59. More than seven stocks fell for every one that rose on the NYSE.
``Citigroup kept saying forever that they weren't going to have to cut the dividend,'' said Bill Knapp of MainStay Investments, a division of New York Life Investment Management, which manages $252 billion. ``With the writedown today, what's to come? We probably need to see the first quarter stuff pass before people are really going to believe what they hear.''
Lowest Since March
The declines added to three weeks of losses that wiped out more than $800 billion in value from U.S. shares and sent the S&P 500 to its lowest level since March. Treasuries rallied, pushing the 10-year note's yield to the lowest since 2004, and the dollar slid against the yen after the Commerce Department report on December retail sales fueled concern about a recession.
Stocks may retreat again tomorrow after Intel Corp. forecast revenue that missed analysts' estimates following the close of trading.
Financial companies in the S&P 500 are projected to report a 69 percent average drop in profits in the fourth quarter, dragging earnings for the overall index down 10 percent, according to a Bloomberg survey of analysts.
Merrill Lynch & Co. and Citigroup turned to outside investors for a second time in two months to replenish capital. Banks have received $59 billion from investors, mostly in the Middle East and Asia, to shore up balance sheets battered by more than $100 billion of writedowns from mortgage-related losses.
'No End of Bad News'
Citigroup decreased $2.12, or 7.3 percent, to $26.94, its lowest since October 2002. The fourth-quarter net loss of $9.83 billion, or $1.99 a share, compared with a profit of $5.1 billion, or $1.03, a year earlier. Citigroup also announced 4,200 job cuts and said it will receive $14.5 billion from outside investors to shore up depleted capital. Citigroup executives previously had said they intended to maintain the dividend, which some investors count on as a source of regular income.
Financial shares in the S&P 500 retreated 3.7 percent, leading declines in all 10 industries in the S&P 500, and are down 8 percent in 2008.
``There seems to be no end of bad news,'' Laszlo Birinyi, president of Birinyi Associates Inc., said in an interview with Bloomberg Television. ``Trying to bottom-fish may work when you're out there angling, but I'm not sure it works with financial markets.''
Energy companies posted the second-steepest decline among 10 groups as oil fell $2.30 to $91.90 a barrel following the retail sales report and the Saudi Arabian oil minister's statement that OPEC is ready to increase production. Chevron lost $2.64 to $88.27. Exxon Mobil Corp., the biggest U.S. crude producer, retreated $1.81 to $89.02.
Apple fell $9.74, or 5.5 percent, to $169.04. The maker of the iPhone and Macintosh computers failed to make an ``earthshaking'' announcement at its Macworld conference in San Francisco, according to Jeff Kagan, an independent telecommunications industry analyst in Atlanta. The company unveiled a slim portable computer, an online movie-rental service and a revamped TV device.
Merrill tumbled $2.96 to $53.01 after the third-biggest U.S. brokerage sold $6.6 billion in preferred shares. Merrill's convertible securities will pay a 9 percent annual dividend until they automatically turn into shares in 2 3/4 years. The investment group will get fewer shares if Merrill's stock price climbs above $61.31 and more if it drops below $52.40, according to the company's statement.
JPMorgan, State Street
JPMorgan Chase & Co., the third-largest U.S. bank by assets, dropped $2.19, or 5.3 percent, to $39.17. The loss at Citigroup raises concern about JPMorgan's credit risk, Deutsche Bank analyst Michael Mayo said, cutting his rating on the shares to ``hold'' from ``buy.''
Bank of America Corp., the second-biggest U.S. bank, tumbled $1.34 to $37.88.
State Street Corp. dropped $5.04 to $79.82. The world's largest money manager for institutions said fourth-quarter earnings fell 28 percent after setting aside $618 million to settle legal claims stemming from losses on subprime mortgages. The company said 2008 growth will be at the lower end of its target ranges.
Wells Fargo & Co. fell to a four-year low after Friedman Billings Ramsey & Co. recommended investors sell shares of the second-largest U.S. mortgage lender because of worsening consumer credit conditions. Wells Fargo lost $1.72, or 6.1 percent, to $26.49.
Wal-Mart Stores Inc., the world's largest retailer, slipped 68 cents to $46.99 after sales at chain stores slumped last month for the first time since June. The Commerce Department said U.S. retail sales decreased 0.4 percent in December, capping the weakest year since 2002. Purchases excluding automobiles also decreased 0.4 percent.
Williams-Sonoma Inc. dropped $2.19, or 9.9 percent, to $20.01. The seller of gourmet cookware reported a decline in holiday sales and lowered its fourth-quarter profit forecast. Sales at stores open more than a year fell 0.4 percent for the nine weeks through Dec. 30, the company said.
``The weak consumer is the thing permeating this entire market,'' said Bartley Barnett, head of listed trading at Memphis-based Morgan Keegan Inc., which manages $120 billion in client assets. ``A lot of companies have to adjust numbers down due to a weak consumer.''
The lower-than-expected forecast from Intel, the world's largest computer-chip maker and fifth-largest stock in the Nasdaq Composite, added to concern that technology spending and revenue growth will be hurt by an increase in customers' borrowing costs. Intel plunged $3.19, or 14 percent, to $19.50 in extended U.S. trading after a 39-cent drop in the regular session.
The dollar fell to the lowest level since 2005 against the yen, making U.S. exports more attractive to foreign buyers. Prices paid to U.S. producers unexpectedly fell in December, pushed down by a decline in energy prices.
Fed fund futures show a 42 percent probability the Federal Reserve will lower its benchmark interest rate by 0.75 percentage point this month, down from 44 percent yesterday. Before Jan. 11, traders saw no chance of a three-quarter point cut to 3.5 percent. The balance of the odds is for a half-point cut.
The 10-year Treasury note yield fell 8 basis points, or 0.08 percentage point, to 3.69 percent. It touched 3.68 percent, the lowest since March 2004. The dollar slipped to 106.84 yen.
The Russell 2000 Index, a benchmark for companies with a median market value of $519 million, dropped 2.1 percent to 697.43. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, fell 2.4 percent to 13,841.83. Based on its decline, the value of stocks decreased by $431 billion.
Apple Inc. (AAPL US)
Bank of America Corp. (BAC US)
Chevron Corp. (CVX US)
Citigroup Inc. (C US)
Exxon Mobil Corp. (XOM US)
Intel Corp. (INTC US)
JPMorgan Chase & Co. (JPM US)
Merrill Lynch & Co. (MER US)
State Street Corp. (STT US)
Wal-Mart Stores Inc. (WMT US)
Wells Fargo & Co. (WFC US)
Williams-Sonoma Inc. (WSM US)