U.S. Stocks Decline; Merrill Lynch, Broadcom, Amazon.com Fall

By Lynn Thomasson

Oct. 24 (Bloomberg) -- U.S. stocks declined for the first time in three days after Merrill Lynch & Co. reported the biggest quarterly loss in its 93-year history and home sales tumbled.

Merrill fell the most in five years on $8.4 billion in writedowns related to credit-market losses. Broadcom Corp., the maker of chips for Nintendo Co.'s Wii game consoles, posted its steepest decline since 2002 after earnings decreased on higher research costs. A profit forecast that may miss some analysts' estimates sent Amazon.com Inc. to its biggest drop in 15 months.

The Standard & Poor's 500 Index lost 24.7, or 1.6 percent, to 1,494.89 at 11:28 a.m. in New York. The Dow Jones Industrial Average retreated 168.27, or 1.2 percent, to 13,507.96. The Nasdaq Composite Index slid 74.11, or 2.7 percent, to 2,725.15.

``Today is really setting up to be very symbolic of what's going to trouble the market,'' said Leo Grohowski, who oversees $162 billion as New York-based chief investment officer at Bank of New York Mellon Wealth Management. ``We may see more pain before we see gain.''

Writedowns sparked by the worst housing slump in 16 years have caused third-quarter profits to decline by an average 14 percent for financial companies in the S&P 500, the worst performance among 10 industries, according to Bloomberg data. Makers of computer chips have posted an average earnings drop of 2.6 percent on concern consumer spending will decrease amid a slowing economy.

Stocks extended declines after a private report said sales of previously owned U.S. homes fell in September to the lowest since record keeping began in 1999.

Banking Concern

Asian and European shares fell on concern that deepening losses from investments backed by U.S. home loans will reduce bank profits. The Morgan Stanley Capital International Asia- Pacific Index slipped 0.1 percent. Europe's Dow Jones Stoxx 600 Index lost 0.3 percent.

Merrill lost $4.12, or 6.1 percent, to $63, its lowest since October 2005. Its writedown is the highest of any securities firm. The third-quarter loss of $2.24 billion, or $2.82 a share, compared with net income of $3.05 billion, or $3.17, a year earlier. Merrill's deficit exceeded the average analyst estimate of a loss of 45 cents a share. Merrill's shares extended their decline after S&P cut its credit ratings on the company.

Lehman, the largest U.S. underwriter of mortgage bonds, declined $3.63 to $54.64. Bear Stearns, the second-biggest U.S. mortgage-bond underwriter, fell $5.40 to $110.76.

``The big danger is that a major bank gets significantly strained,'' said Thomas Koerfgen, a fund manager at SEB Asset Management in Frankfurt, which oversees the equivalent of $20 billion. ``When it comes to banking stocks, uncertainty will continue in the coming weeks and months.''

Broadcom, Amazon.com

Broadcom Corp. plunged $7.22, or 17 percent, to $34.84. The maker of semiconductors for Motorola Inc. set-top boxes and Nintendo Co.'s Wii game consoles said yesterday third-quarter profit fell 75 percent after an expansion into the mobile-phone market boosted research spending. Deutsche Bank AG cut its recommendation on the stock to ``hold'' from ``buy.''

Amazon.com sank $14.86, or 15 percent, to $85.96, the biggest drop since July 2006. Fourth-quarter operating income will be between $221 million and $291 million, the world's largest Internet retailer said yesterday. Scott Tilghman, an analyst at Soleil Securities Corp., estimated profit of $278.5 million.

Technology shares fell 2.2 percent as a group.

Corning, Legg Mason

Corning Inc. fell $1.68 to $23.06. The biggest maker of glass for liquid-crystal display screens forecast fourth-quarter sales that fell short of analysts' estimates as TV sales slowed.

Legg Mason Inc. lost $3.80 to $79.65. The money manager that oversees $1.01 trillion reported earnings that rose less than analysts estimated as investors pulled $9.6 billion from stock funds including Bill Miller's Legg Mason Value Trust.

Moody's Corp. fell $1.40 to $45.98. The world's second largest provider of credit ratings lowered its earnings forecast for the year after a debt market slump reduced demand.

National City Corp., the biggest bank in Ohio, declined $1.71 to $22.20. The lender, which sold its subprime mortgage unit to Merrill last year just before the industry unraveled, posted third-quarter profit below analysts' estimates because of losses from home lending.

Purchases of previously owned homes declined 8 percent to an annual rate of 5.04 million, the fewest since record keeping began in 1999, from a 5.48 million August pace, the National Association of Realtors said. Sales were down 19 percent from September 2006 and the median home price dropped.