By Elizabeth Stanton
Feb. 27 (Bloomberg) -- Most U.S. stocks fell for the first time in four days as a slump in utility and drugmaker shares overshadowed speculation Federal Reserve Chairman Ben S. Bernanke will cut interest rates to stave off a recession.
Dynegy Inc., owner of power plants in 13 states, tumbled the most in three years on earnings that missed estimates. Johnson & Johnson and Amgen Inc. declined after the Journal of American Medical Association reported their anemia drugs increased the risk of death in cancer patients. Bernanke's pledge to act quickly to boost growth sparked a rally in banks and eased concern over a drop in durable goods orders.
The Standard & Poor's 500 Index, which swung between gains and losses at least 25 times, slid 1.27 points, or 0.1 percent, to 1,380.02. The Dow Jones Industrial Average added 9.36, or 0.1 percent, to 12,694.28. The Nasdaq Composite Index rose 8.79, or 0.4 percent, to 2,353.78, led by Apple Inc. About four stocks fell for every three that rose on the New York Stock Exchange.
``It's a friendly Fed, but the market is torn,'' said Dean Gulis, part of a group that manages $3 billion in Bloomfield Hills, Michigan for Loomis Sayles & Co. ``Most people think we're in or on the edge of a recession. That's certainly being discounted to some degree, but not fully.''
The declines ended the market's biggest three-day rally of the year that was spurred by a rally in energy shares after oil surged to a record. Exxon Mobil Corp. led a retreat in the industry today as higher inventories sent crude lower.
Bernanke's testimony to Congress prompted traders to increase bets on larger rate cuts and sent the dollar to a record low against the euro. Financial shares also gained after regulators allowed Fannie Mae and Freddie Mac to buy more mortgages.
Dynegy fell 70 cents, or 8.5 percent, to $7.56, leading utilities in the S&P 500 to a 1.9 percent drop, the biggest decline among 10 industry groups. The company reported an unexpected fourth-quarter net loss of $46 million. Analysts expected a profit.
Utilities also dropped after Jonathan Golub, the New York- based chief investment strategist at Bear Stearns Cos., advised clients to sell shares of companies in the industry.
``The market is currently underestimating a number of potential risks,'' he said.
Amgen lost $1.22 to $46.60. Johnson & Johnson, the world's biggest health-products maker, slipped 68 cents to $63.04. A study published in this week's Journal of the American Medical Association found that cancer patients who take anemia drugs sold by the companies have a 10 percent higher risk of dying than those who didn't take the treatments.
The risks of the anemia drugs are ``well-defined,'' and the newly published analysis ``looks exactly like what we've seen before,'' Roger Perlmutter, Amgen's head of research and development, said in an interview.
Goldman Sachs Group Inc., the largest securities firm, and Citigroup Inc., the biggest U.S. bank, led financial shares to their fourth straight gain. Goldman rose $8.10, or 4.7 percent, to $180.80 for the second-biggest gain in the S&P 500. Citigroup added 77 cents, or 3.1 percent, to $25.72 for the biggest gain in the Dow average.
Bernanke told Congress that the Fed ``will act in a timely manner'' to insure against ``downside risks'' to the economy.
Traders boosted bets that the Fed will cut interest rates by 0.75 percentage point to 2.25 percent by the central bank's next meeting on March 18. Futures trading showed 10 percent odds of a three-quarter-point cut, compared with no chance yesterday. The remaining bets are for a half-point reduction to 2.5 percent.
The dollar weakened to more than $1.51 per euro for the first time today, and an index that tracks the currency against six major counterparts fell to a record.
The Fed has lowered its target for the overnight lending rate between banks five times since September, most recently to 3 percent on Jan. 30. The rate cuts aimed to blunt the economic impact of bank and brokerage firm losses stemming from the worst U.S. housing decline in more than 20 years.
Freeport-McMoRan Copper & Gold Inc. led mining companies higher as bullion futures rose to a record $967.70 an ounce and copper reached a 21-month high of $3.85 a pound. Freeport- McMoRan rose $3.30, or 3.3 percent, to $103.62.
``This is a market which I think is firming up,'' Laszlo Birinyi, president of Westport, Connecticut-based research and investment firm Birinyi Associates Inc., said in an interview with Bloomberg Television. ``People are getting a little more optimistic.''
Technology shares also gained, led by Cisco Systems Inc., Apple Inc. and International Business Machines Corp. Cisco, the biggest maker of computer-networking equipment, rose 88 cents to $24.95 after being added to the ``buy list'' at Wells Fargo Investments. Juniper Networks Inc., the second-largest, rose $1.78, or 6.5 percent, to $29.29, the biggest gain in the S&P 500.
Apple added $3.81 to $122.96. The company said it plans to move up the release of a software kit that gives outside developers the ability to modify its iPhone.
IBM climbed for a fourth day, adding $2.08 to $116.46 after Chief Financial Officer Mark Loughridge said in a statement published on the company's Web site that U.S. business may improve this quarter. The company said there is ``strong customer demand'' in the U.S. for products and services that help customers save costs and improve productivity.
IBM, the world's biggest computer-services company, climbed to a four-month high yesterday and led the market higher after announcing plans to buy back up to $15 billion of its own stock.
Northwest Airlines Corp. and Delta Air Lines Inc. led airline shares lower. Delta, in talks to merge with Northwest, said it hasn't reached a satisfactory agreement, while bargaining between the carriers' pilots unions stalled over seniority. Northwest fell 91 cents to $15.10. Delta dropped 91 cents to $15.
Autodesk Inc. retreated $6.11 to $32.99, the biggest drop in the S&P 500. The software maker reported fourth-quarter profit, excluding compensation and acquisition costs, of 52 cents a share. That missed the 54-cent average of analysts' estimates.