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Wachovia hits banks and cancels oil gains; stocks slip

14/04/2008 - 21:28

By Kristina Cooke

NEW YORK (Reuters) - Stocks edged lower on Monday after an unexpected quarterly loss from Wachovia Corp dragged down the financial sector, overshadowing strong gains in energy companies as oil closed at a record.

Goldman Sachs added to the market's negative tone after it said the quarterly earnings season, which is just starting, looks "awful" and that reports still to come will be generally disappointing and drive the S&P 500 lower in coming weeks.

Wachovia, the No. 4 U.S. bank, fueled fears about anemic earnings when it said it would cut its dividend, eliminate jobs and raise capital of $7 billion after becoming the latest casualty of the global credit crunch. Its stock dropped 8 percent, while the S&P's financial-sector index <.GSPF> fell 2.4 percent.

"Today all the troubles were in financial services. This is expected to be a big week in earnings and it feels like the calm before a potential storm when we get more earnings information," said Linda Duessel, market strategist at Federated Investors in Pittsburgh.

Still, energy companies kept index losses in check as the price of oil rose to a record settlement just short of $112 a barrel.

A surprising rise in U.S. retail sales also helped, after data showed a modest increase in March, pushed up by a jump in gasoline sales, according to a government report.

"Retail sales were a little bit better and there is a rotating into energy due to the belief that the high price of oil could have staying power," Duessel said.

The Dow Jones industrial average <.DJI> slipped 23.36 points, or 0.19 percent, ending at 12,302.06. The Standard & Poor's 500 Index <.SPX> declined 4.51 points, or 0.34 percent, to 1,328.32. The Nasdaq Composite Index <.IXIC> dropped 14.42 points, or 0.63 percent, to 2,275.82.

With earnings season in full swing, investors are taking their trading cues from corporate results. Wall Street analysts expect S&P 500 earnings to show a 13.8 percent decline in quarterly profits compared with an 11.8 percent drop projected one week ago, according to Reuters Estimates.

Stocks took a sharp tumble on Friday when economic bellwether General Electric Co reported an unexpected 6 percent drop in earnings. That raised concerns more companies could miss earnings estimates.

On Monday, Wachovia's stock ended down 8.1 percent at $25.55 and was the heaviest weight on the S&P.

Three other Dow components in the banking sector also declined, with shares of Bank of America down 3.7 percent at $35.58, Citigroup down 3.6 percent at $22.51 and JPMorgan Chase & Co down 2.4 percent at $41.50.

Among oil companies, shares of Devon Energy gained 2.6 percent to $112.06 and Transocean Inc shares rose 4.7 percent to $151.89.

Exxon Mobil shares advanced 1.2 percent to $89.70 and ranked second among the stocks buoying the Dow average.

Movie rental chain Blockbuster Inc said on Monday that it had offered to buy struggling electronics retailer Circuit City Stores Inc . Circuit City shares surged 27.4 percent to $4.97, while Blockbuster shares slid 10.2 percent to $2.81 as some investors showed skepticism about the combination.

In other earnings news, building maintenance supply company W.W. Grainger Inc posted a 12 percent rise in first-quarter profit, beating analysts' forecasts. Its stock rose 2.2 percent to $81.73.

Trading was light on the New York Stock Exchange, with about 1.18 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 1.63 billion shares traded, also falling short of last year's daily average of 2.17 billion.

Declining stocks outnumbered advancing ones by a ratio of about 3 to 2 on both the NYSE and on Nasdaq.

(Editing by Jan Paschal)


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