Market slips as banks drag after Wachovia loss

14/04/2008 - 19:13

By Kristina Cooke

NEW YORK (Reuters) - Stocks inched lower on Monday after an unexpected quarterly loss from Wachovia Corp hurt bank shares, overshadowing a surprise rise in March retail sales.

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 disappoint and drive the S&P 500 lower in coming weeks.

Wachovia said it would cut its dividend, eliminate jobs and raise capital of $7 billion after becoming the latest casualty of the global credit crunch. The No. 4 U.S. bank's stock fell 10 percent, dragging the S&P financial sector index <.GSPF> down 2.1 percent.

But retail sales kept a floor under the market after data showed a modest increase in March, pushed up by a jump in gasoline sales, according to a government report. An S&P index of retailers' shares <.RLX> was up 0.7 percent. Energy companies also helped, giving the biggest boost to the S&P 500 as the price of oil rose above $111 a barrel for a time.

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.

"We're in the midst of this earnings season, so there is some nervousness about the outlook," said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut.

"And you still have the financial drag. There's Wachovia, which is down 10 percent, and the group still is not showing signs of stabilizing. But oil is helping."

The Dow Jones industrial average <.DJI> was down 2.11 points, or 0.02 percent, at 12,323.31. The Standard & Poor's 500 Index <.SPX> was down 2.03 points, or 0.15 percent, at 1,330.80. The Nasdaq Composite Index <.IXIC> was down 2.93 points, or 0.13 percent, at 2,287.31.

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.

By early afternoon Monday, Wachovia's stock was down 9.9 percent to $25.06 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 percent at $35.84, Citigroup down 4.1 percent at $22.41 and JPMorgan Chase & Co down 1.7 percent at $41.81. Citigroup and Bank of America contributed the biggest drag on the Dow.

Among oil companies, shares of Devon Energy gained 2.7 percent to $112.09 and Transocean Inc shares rose 4.2 percent to $151.42..

Exxon Mobil shares advanced 0.9 percent to $89.41 and ranked second among the stocks buoying the Dow average.

U.S. crude oil futures were up 50 cents at $110.64 a barrel on the New York Mercantile Exchange.

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 30 percent at $5.07, while Blockbuster shares slid almost 16 percent to $2.62 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 3.2 percent to $82.58.

(Editing by Kenneth Barry)

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