By Eric Martin
March 12 (Bloomberg) -- U.S. stocks fell for the fourth time in five days on concern the Federal Reserve will fail to prevent a recession as oil climbed above $110 a barrel, pushing down refiners, retailers and banks.
The Dow Jones Industrial Average fell 211 points from its midday high as oil rose. Sunoco Inc., the largest refiner in the U.S. Northeast, dropped the most since 1995 after Caris & Co. said demand may decrease. Humana Inc. led shares of health insurers to a three-year low on a reduced earnings forecast. Financial firms, which led the market to its biggest gain in five years yesterday, helped erase a quarter of that rally.
The Standard & Poor's 500 Index lost 11.88 points, or 0.9 percent, to 1,308.77. The Dow slipped 46.57 points, or 0.4 percent, to 12,110.24. The Nasdaq Composite Index decreased 11.89, or 0.5 percent, to 2,243.87. Two stocks dropped for every one that rose on the New York Stock Exchange.
``There's a tremendous amount of uncertainty,'' said Joseph Keating, who helps manage about $3 billion as chief investment officer at First American Asset Management in Birmingham, Alabama. ``There's not a road map to how this will all play out, the combination of the unprecedented seizure we've seen in the credit markets as well as an unprecedented drop in home prices.''
Nine of 10 industries in the S&P 500 fell after Merrill Lynch & Co., Goldman Sachs Group Inc. and others said the Fed's plan may not eliminate gridlock in credit markets. The S&P 500 rallied the most since October 2002 yesterday after the central bank said it would pump $200 billion into the banking system to shore up financial firms battered by $188 million in losses and writedowns related to the subprime mortgage market's collapse.
Caterpillar Inc., the largest maker of bulldozers, led industrial shares higher after boosting its sales forecast.
The S&P 500 is down 16 percent from its Oct. 9 record, four percentage points away from the 20 percent tumble that typically marks a so-called bear market. The benchmark for U.S. equities has declined an average 30 percent in bear markets, according to Bespoke Investment Group.
Sunoco fell $4.22, or 7.3 percent, to $53.27. The refiner was downgraded to ``below average'' from ``above average,'' along with Frontier Oil Corp., Holly Corp., and Tesoro Corp. Valero Energy Corp., the largest U.S. refiner, was cut to ``average'' from ``above average.''
ConocoPhillips slid $1.18 to $78.32 after saying higher costs for services and equipment prompted it to reduce its production target. ConocoPhillips said its cost of finding and developing a barrel of oil reserves will average $16 over the next five years, up from $13 last year and $10 in the preceding five years.
Energy shares in the S&P 500 lost 1.5 percent as a group, even as oil climbed to a record as the dollar weakened to an all-time low against the euro.
Retailers fell on the rally in crude. RadioShack Corp., the third-largest U.S. electronics chain, dropped 82 cents, or 5.1 percent, to $15.40. Circuit City Stores Inc. fell 19 cents, or 4.8 percent, to $3.78. Macy's Inc., the owner of its namesake chain and Bloomingdale's, retreated 78 cents, or 3.3 percent, to $23.20.
Humana tumbled $6.50, or 14 percent, to $40.88 after cutting its 2008 earnings forecast to a range of $4 to $4.25 a share from a previously projected $5.35 to $5.55. The company cited higher-than-anticipated claims volumes. Rival WellPoint Inc., which dropped 28 percent yesterday after reducing its forecast, fell 81 cents to $46.45 today.
UnitedHealth Group Inc., the largest U.S. health insurer, retreated $1.56 to $36.68.
Health Insurers Tumble
The S&P 500 Managed Health Care Index of six companies dropped 17 percent yesterday, the most since 1998, following WellPoint's forecast. The index slid another 2 percent today to the lowest since January 2005.
Financial stocks reversed earlier gains after New York Insurance Superintendent Eric Dinallo said in a Bloomberg Television interview that it's ``too early to say bonds insurers are out of the woods.'' MBIA Inc., the world's biggest bond insurer, dropped 59 cents to $11.55. Ambac Financial Group Inc., the second largest, fell 87 cents to $6.86. MGIC Investment Corp., the largest U.S. mortgage insurer, slid the most in the S&P 500, dropping $2.08, or 14 percent, to $12.92.
The AMEX Airline Index dropped 10 percent, the most since August 2002, after JPMorgan Chase & Co. lowered its ratings on the biggest carriers because of soaring jet-fuel prices and a slowing economy.
Northwest Airlines Corp. tumbled $1.98, or 16 percent, to $10.25. Analyst Jamie Baker cut Northwest, American Airlines parent AMR Corp. and United Airlines parent UAL Corp. to ``underweight'' from ``overweight.'' AMR plunged $1.36, or 13 percent, to $9.31. UAL Corp. retreated $2.54, or 9.5 percent, to $24.29.
Delta Air Lines Inc. lost $1.98, or 16 percent, to $10.13. Continental Airlines Inc. declined $2.16 to $20.46. The two carriers were reduced to ``neutral'' from ``overweight'' by Baker.
Southwest Airlines Co. retreated 91 cents to $11.49 after grounding 41 of its Boeing Co. 737s without disclosing a reason for the action.
Caterpillar rose $2.64 to $75.25. The company increased its sales forecast for 2010 by 20 percent to $60 billion, exceeding analysts' estimates, on growing demand from emerging markets. Caterpillar has almost doubled sales since 2003 on demand from markets such as China, Russia and South Africa.
Investor pessimism about U.S. stocks surged to the highest since September 1998 last week after employers eliminated jobs at the fastest rate in five years, according to Investors Intelligence. The number of newsletter writers who were bearish increased to 43.3 percent from 36.6 percent the prior week, the firm said. Optimism fell the most on record to 31.1 percent, the lowest since the market began to rally in October 2002.
Separately, a survey of Bloomberg users showed stock investors in the world's biggest markets are growing more convinced equities will fall in the next six months.
The S&P 500, the U.K.'s FTSE 100 Index, France's CAC 40 Index, the German DAX Index, Italy's S&P/MIB Index, the Swiss Market Index, Japan's Nikkei 225 Stock Average, Hong Kong's Hang Seng and Spain's IBEX 35 Index will decline, according to the Bloomberg Professional Global Confidence Survey. Only investors in Brazil predicted their market will rise. The survey measured the confidence of 3,896 users from New York to Frankfurt and Tokyo.
Analysts expect earnings at S&P 500 companies on average to fall 5.6 percent and 2.3 percent in the first and second quarters of 2008, respectively, before rebounding in the third quarter.
The Russell 2000 Index, a benchmark for companies with a median market value 22 times smaller than members of the S&P 500, dropped 1 percent. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, fell 0.8 percent to 13,179.46. Based on its decline, the value of stocks decreased by $134 billion.