U.S. Stocks Decline on Citigroup's Loss, Drop in Retail Sales

The U.S. stock market resumed its January swoon 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 the most since November in New York Stock Exchange trading after cutting its dividend by 41 percent because of rising home-loan defaults. Exxon Mobil Corp., the biggest U.S. oil company, posted its steepest drop in seven weeks. Wal-Mart Stores Inc., the world's largest retailer, tumbled on a report showing sales at chain stores slumped in December for the first time since June.

The Dow Jones Industrial Average, which had its biggest gain for the year yesterday, slid 182.25, or 1.4 percent, to 12,595.9 at 10:30 a.m. in New York. The Standard & Poor's 500 Index lost 25.06, or 1.8 percent, to 1,391.19, bringing its 2008 decline to 5.3 percent. The Nasdaq Composite Index decreased 44.7, or 1.8 percent, to 2,433.6. More than 10 stocks retreated for every one that rose on the NYSE.

There's probably going to be more pain in the financial stocks, said Bartley Barnett, head of listed trading at Memphis-based Morgan Keegan Inc., which manages $120 billion in client assets. The weak consumer is the thing permeating this entire market. We've had a lot of companies have to adjust numbers down due to a weak consumer.

Cash Infusions

The declines added to three weeks of losses that wiped out more than $800 billion in value from U.S. shares. Merrill Lynch & Co. and Citigroup were forced to turn to outside investors for a second time in two months to replenish capital. Wall Street 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.

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.

The dollar approached a record low versus the euro, making U.S. exports more attractive to foreign buyers, after the drop in retail sales bolstered speculation the economy is headed for recession. Prices paid to U.S. producers unexpectedly fell in December, pushed down by a decline in energy prices.

Citigroup decreased $1.63, or 5.6 percent, to $27.43. 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 cut its dividend by 41 percent, announced 4,200 job cuts and said it will receive $14.5 billion from outside investors to shore up depleted capital.

'No End of Bad News'

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,

Exxon lost $1.74, or 1.9 percent, to $89.09 after the retail sales report sent crude oil down 2.6 percent to $91.78 a barrel in New York, its lowest level in more than three weeks.

Merrill tumbled $1.62 to $54.35 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.

Wal-Mart slipped 48 cents to $47.19. The Commerce Department said sales at U.S. retailers fell 0.4 percent in December, capping the weakest year since 2002. Sales declined for the first time since June, following a revised 1 percent gain in November, the Commerce Department said. Purchases excluding automobiles also decreased 0.4 percent.

State Street

State Street Corp. dropped $3.11 to $81.75. 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.

Williams-Sonoma Inc. dropped $2.20, or 9.9 percent, to $20. The seller of gourmet cookware reported a decline in holiday sales and lowered its fourth-quarter profit forecast amid the worst housing slump in 27 years. Sales at stores open more than a year fell 0.4 percent for the nine weeks through Dec. 30, the company said.

Genentech Inc. decreased $2 to $68.64. The world's second- biggest biotechnology company said sales of its top product, the cancer drug Avastin, fell short of analysts' expectations.

Traders held steady in their bets for an interest-rate cut. Fed fund futures show a 44 percent probability the Federal Reserve will lower its benchmark interest rate by 0.75 percentage point this month. Before Jan. 11, traders saw no chance of a three-quarter point cut to 3.5 percent. The balance of the odds are for a half-point cut.