By Eric Martin
Nov. 21 (Bloomberg) -- U.S. stocks fell, wiping out this year's gain for the Standard & Poor's 500 Index, after concern that losses from mortgage defaults will spread through the economy pushed down shares of banks and commodities producers.
American Express Co. tumbled to the lowest in 14 months after Morgan Stanley recommended investors sell shares of the third-largest credit-card network. Exxon Mobil Corp., the biggest U.S. oil company, dropped after oil retreated. Circuit City Stores Inc., the second-largest consumer-electronics chain, declined to a four-year low after JPMorgan said it may not find a buyer to turn around its business until next year.
The S&P 500 lost 22.93, or 1.6 percent, to 1,416.77, leaving it with a 0.1 percent loss on the year. The Dow Jones Industrial Average declined 211.1, or 1.6 percent, to 12,799.04 as 29 of its 30 members retreated. The Nasdaq Composite Index dropped 34.66, or 1.3 percent, to 2,562.15. Almost four stocks fell for every one that rose on the New York Stock Exchange.
``It's a very panicky market,'' said John Kattar, who oversees $2 billion as chief investment officer at Eastern Investment Advisors in Boston. ``There's a growing feeling that the problems are unknowable and unquantifiable, and that there's no way of dealing with it except through the passage of time.''
Ten-year Treasury yields fell below 4 percent for the first time in more than two years as investors sought the safety of U.S. government debt. Benchmark stock indexes also declined in Asia and Europe.
`Sharply Deteriorating'
American Express dropped $2.66, or 4.7 percent, to $54.34. ``Sharply deteriorating'' consumer credit quality may prove a bigger issue for the company than other card issuers because its lending portfolio has grown ``far and away faster than its peers,'' analysts Kenneth Posner and Charles Murphy wrote in a note to investors.
Exxon Mobil retreated 78 cents to $87.04. Crude oil fell from a record after an Energy Department report showed that inventories at the delivery point for the U.S. benchmark grade increased. Crude oil for January delivery lost 74 cents to $97.29 a barrel. Futures climbed to $99.29 earlier, the highest intraday price since trading began in 1983.
Circuit City, Office Depot
Circuit City shares plunged 32 cents, or 5.6 percent, to $5.45. A ``turnaround likely requires deep pockets -- such as the involvement of a strategic partner (or acquirer),'' wrote JPMorgan analyst Stephen Chick, who cut the stock to ``neutral.'' ``Such a scenario may wait itself out until after the second half'' of 2008.
Office Depot Inc., the world's second-largest office supplies retailer, lost 77 cents, or 4.4 percent, to $16.72.
The holiday sales season may be the grimmest for U.S. chain stores in at least five years as reduced profit forecasts by J.C. Penney Co., Starbucks Inc. and FedEx Corp. show the effects of a slowing economy. The traditional kick-off to the holiday rush, known as Black Friday because the season may determine whether retailers are profitable, is in two days. U.S. exchanges are closed tomorrow for the Thanksgiving holiday.
Freddie Mac declined 74 cents to $26. Goldman, Sachs & Co. cut its price estimate on shares of the second-largest U.S. mortgage-finance company to $24 from $73 and lowered its 2008 earnings estimate by 82 percent.
Freddie Mac might need to raise as much as $6 billion to bolster its capital amid the worst housing slump in at least 16 years, according to analysts at Fox-Pitt Kelton. The government- chartered company dropped 29 percent yesterday after reporting its biggest quarterly loss and saying it may cut its dividend. Freddie said it would seek more reserves in a ``large transaction.''
'Credit Collapse'
``Everybody's focused on Fannie Mae and Freddie Mac,'' said Wayne Wilbanks, who oversees $1.3 billion as chief investment officer at Wilbanks Smith & Thomas Asset Management LLC in Norfolk, Virginia. ``We're going through a good, old-fashioned credit collapse.''
Countrywide Financial Corp., the biggest U.S. mortgage lender, lost 86 cents to $9.42 and Citigroup Inc., the largest U.S. bank by assets, declined 67 cents to $30.73 as financial and mortgage companies resumed their week-long slide. Goldman Sachs Group Inc., the world's biggest securities firm by market value, fell $7.98 to $209.50.
Financial shares in the S&P 500 fell for a sixth straight day, losing 2.2 percent as a group.
A gauge of stock-market volatility rose to the highest level in a week. The Chicago Board Options Exchange Volatility Index, or VIX, rose 7.9 percent to 26.84.
Freeport-McMoRan Copper & Gold Inc. lost $1.79 to $90.06 after Goldman Sachs removed shares of the world's largest publicly traded copper producer from its ``conviction buy'' list.
Economy Watch
The Dow Jones Transportation Average declined for a sixth day to the lowest level since September 2006 as the Dow industrials dropped to the lowest since April. The simultaneous lows signal the start of a bear market to investors who follow ``Dow Theory,'' which views the transportation and industrial gauges as harbingers of economic trends.
The index of leading U.S. economic indicators fell more than forecast in October after a plunge in building permits and an increase in firings. The report added to concern that the economy is slowing after the Federal Reserve cut its forecast for 2008 growth yesterday.
Treasury Secretary Henry Paulson said lenders should move ``aggressively'' to offer new mortgage terms as defaults increase, according to the Wall Street Journal.
Former Federal Reserve Chairman Alan Greenspan said recent signs that a collapse in credit tied to subprime-mortgage lending was ending have proven wrong.
'Come to a Halt'
``The progress has come to a halt'' in recent weeks, Greenspan said at a business forum in Toronto yesterday. ``The reason is increasing recognition that it's going to take a long while to get rid of those excess inventories of homes in the U.S.''
Bear Stearns Cos., the manager of two hedge funds that collapsed in July, fell $2.59 to $91.28. American International Group Inc., the world's largest insurer, dropped $3.11, or 5.7 percent, to $51.33, the steepest decline in the Dow average. Directors and top executives were sued yesterday by investors who claimed they were deceived about each company's subprime- mortgage investments.
AIG, which is based in New York, also has units that originate, insure and invest in home loans.
Biggest Drop in S&P 500
Patterson Cos. led declines in the S&P 500, slumping $8.54, or 23 percent, to $29.08. The distributor of dental, veterinary and rehabilitation supplies reduced its full-year forecast, saying it expects to earn as much as $1.72 a share. The average estimate from analysts in a Bloomberg survey was $1.74.
ACA Capital Holdings Inc. dropped 25 cents, or 23 percent, to 85 cents. The bond insurer under scrutiny by Standard & Poor's may have its credit rating cut, forcing banks to take on $60 billion of collateralized debt obligations, JPMorgan Chase & Co. analyst Andrew Wessel said.
Homebuilders dropped 5.5 percent, led by Pulte Homes Inc., the third-largest U.S. homebuilder by revenue, and Meritage Homes Corp. Home prices fell in one third of U.S. cities last quarter as stricter lending standards caused a 14 percent decline in sales nationwide.
Prices dropped in 54 of 150 metropolitan areas in the third quarter and the median sales price tumbled 2 percent nationwide, the National Association of Realtors said. Home sales, including single-family properties and condominiums, slid to 5.42 million at an annualized pace from 6.29 million a year ago. Pulte fell $1.35, or 13 percent, to $9.25. Meritage dropped 90 cents to $14.20.
GM Gains
Stocks briefly pared their losses after GMAC LLC said it may buy a non-U.S. mortgage firm and General Motors Corp. said it isn't required to inject capital into the home and auto lender it once owned.
GM gained for the first time in six days and was the only member of the Dow average to rise today. Its shares added 10 cents to $26.39 after the largest U.S. automaker said it has ``no further obligation'' to boost GMAC. The November 2006 agreement to sell 51 percent of GMAC to a group led by Cerberus Capital Management LP ended any need to fund GMAC beyond a $1 billion infusion earlier this year, GM's executive director of investor relations, Randy Arickx, said in an interview.
The MSCI World Index lost 1.8 percent, the most since Aug. 9. Europe's Dow Jones Stoxx 600 Index fell 2.6 percent to a 13- month low.
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