U.S. Stocks Fall on Jump in Jobless Claims, Default...

U.S. Stocks Fall on Jump in Jobless Claims, Default Risks

http://www.bloomberg.com/apps/news?pid=20601087&sid=a5HDrlFqM4UU&refer=home

By Eric Martin

Nov. 20 (Bloomberg) -- U.S. stocks fell and the Standard & Poor's 500 Index slid to a six-year low after jobless claims jumped to the highest level since 1992 and costs for protection against corporate defaults surged to a record.

General Motors Corp. sank as much as 39 percent on speculation time is running out for Congress to save the biggest U.S. car company. JPMorgan Chase & Co. tumbled 13 percent and Citigroup Inc. plunged 18 as concern that an automaker will file for bankruptcy triggered a surge in insurance on company credit. Europe's benchmark index slid to a five-year low, while Asia's plunged 5.2 percent. Treasury yields sank to record lows as investors sought the safety of government debt.

``It's an ugly mess out there,'' said Randy Bateman, who oversees $15 billion as chief investment officer of the asset management unit of Huntington Bancshares Inc. in Columbus, Ohio. ``The economy is confirming it is very, very weak.''

The S&P 500 declined 1.3 percent to 796.18 at 11:38 a.m. in New York, below its lowest close since October 2002. The benchmark gauge fell as low as 776.76 earlier to give it a year- to-date loss of 47 percent, which would be the steepest annual tumble in the measure's 80-year history.

The Dow Jones Industrial Average lost 64.36 points, or 0.8 percent, to 7,932.92 and the Nasdaq Composite Index decreased less than 0.1 percent to 1,386.31.

Losses Limited

Losses were limited today as investors bought shares of companies most likely to weather a recession, sending Costco Wholesale Corp., the largest warehouse club, up as much as 6.7 percent and phone companies AT&T Inc. and Verizon Communications Inc. to gains of more than 5 percent.

Benchmark indexes slid yesterday after the government said consumer prices excluding food and fuel costs fell for the first time since 1982 last month. The report highlighted the risk that deflation may exacerbate the economic slump.

The Federal Reserve will probably cut interest rates to zero percent over the next two months to staunch deflation, JPMorgan wrote in a note to investors yesterday.

General Motors, the biggest U.S. automaker, declined as much as $1.09 to $1.70.

Democratic congressional leaders disagreed with Republicans and President George W. Bush's administration over how to provide $25 billion in aid to GM, Ford Motor Co. and Chrysler LLC. Only two days remain in a lame-duck session for lawmakers to resurrect a compromise.

GMAC LLC, the largest lender to GM's car dealers, has applied for status as a bank holding company so it can get access to the Treasury's $700 billion rescue fund.

Financials Slump

JPMorgan, the largest U.S. bank by market value, tumbled $3.69 to $24.78. Citigroup sank $1.17 to $5.23, extending its yearly loss to 82 percent. The S&P 500 Financials Index slid 4.1 percent to the lowest level since August 1995.

Credit-default swaps on the Markit CDX North America Investment-Grade index jumped 14 basis points to a record 261 as of 10:15 a.m. in New York, according to broker Phoenix Partners Group.

Treasury Secretary Henry Paulson has abandoned a plan to use the Troubled Asset Relief Program to buy mortgage assets from banks, helping send U.S. financial shares lower and credit default risk to a record high.

``Changing the terms of the TARP as suddenly as he did undermined investor confidence,'' said Richard Schlanger, a bond fund manager in Boston at Pioneer Investments, which oversees $44 billion. ``It's a frightening situation.''

Crude oil fell below $50 a barrel in New York for the first time in almost two years. U.S. fuel use during the past four weeks averaged 19.1 million barrels a day, down 7 percent from a year ago, an Energy Department report showed yesterday.

50 Percent Slide

The S&P 500 has dropped almost 50 percent from its 2007 record as earnings for companies in the index decreased for five straight quarters and worldwide writedowns and credit losses reached $966 billion in the worst financial crisis since the Great Depression.

The index rose or fell at least 1 percent in 86 percent of October's trading days, making it the second-most volatile month in its 80-year history, according to S&P analyst Howard Silverblatt. Only November 1929 produced bigger swings, he said.

Profits fell 17 percent on average at companies in the index that have reported third-quarter results, according to Bloomberg data. Analysts expect a 9.5 percent decline in full- year earnings, based on estimates compiled by Bloomberg.

``Right now it's hard to call a bottom,'' Peter Dixon, global equities economist at Commerzbank AG, said in an interview on Bloomberg Radio from London. ``We are in a situation where markets are taking pretty much every piece of bad news and magnifying it.''