- The Washington Times - Thursday, May 22, 2008


U.S. stocks tumbled yesterday, sending the Standard & Poor’s 500 Index to its biggest two-day drop since March, as the Federal Reserve signaled that it is done cutting interest rates and as record oil prices threatened to reduce profits at consumer companies.

Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. sent financial shares to their lowest since April 15. Target Corp. led retailers to their worst decline in a month, and an index of airlines slid to an all-time low as crude climbed above $133 a barrel.

The S&P; 500 lost 22.69 points, or 1.6 percent, to 1,390.71. The Dow Jones Industrial Average slid 227.49, or 1.8 percent, to 12,601.19. The Nasdaq Composite Index fell 43.99, or 1.8 percent, to 2,448.27. Four stocks retreated for every one that rose on the New York Stock Exchange.

“The American market is a bottomless pit right now,” said Peter Schiff, president of Darien, Conn.-based brokerage Euro Pacific Capital, which has more than $1 billion in customer accounts. “The Fed can’t cut rates any more. Oil is $132 a barrel and rising. Any company that collects revenues from American consumers is going to have terrible earnings, and share prices are going to fall.”

All 10 industries in the S&P; 500 slid after the minutes from the Fed’s April meeting suggested that record energy costs and rising public expectations for inflation threatened their ability to continue cutting rates. Policy-makers also reduced their projections for economic growth this year by almost a full percentage point and raised their forecasts for inflation amid curtailed bank lending and a record rise in the prices for oil.

The S&P; 500’s 2.5 percent drop over the past two days was the benchmark’s biggest decline since the Federal Reserve brokered JPMorgan Chase & Co.’s buyout of Bear Stearns Cos. in March.

Citigroup slid 4.8 percent to $21.06, while Bank of America lost 2.2 percent to $34.63 and JPMorgan fell 2.9 percent to $42.42.

The S&P; 500 Financials Index slumped for a fourth day, losing 2.3 percent. The index has tumbled 34 percent in the past year, allowing technology companies to surpass the group as the biggest industry in the S&P; 500, after global banks and securities firms racked up $379 billion in asset write-downs and credit losses related to the collapse of the subprime-mortgage market.

Lehman Brothers Holdings Inc. lost 5.8 percent to $39.56 after Merrill Lynch & Co. reduced earnings forecasts. Lehman will probably earn 6 cents a share in the quarter that ends May 30, down from Merrill’s earlier estimate of 82 cents. Merrill analyst Guy Moszkowski lowered his full-year estimate to $2.80 per share from $3.88.

Target, the second-largest U.S. discount chain, tumbled 2.6 percent to $52.87, leading retailers in the S&P; 500 to a 2.5 percent drop as a group.

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