Exxon Mobil Corp., General Electric Co. and AT&T Inc. led declines in New York trading, and all 10 industry groups in the Standard & Poor's 500 Index dropped, after the Institute for Supply Management's index fell more than forecast in January. Goldman Sachs Group Inc. posted its biggest two-day drop since November on Oppenheimer & Co. analyst Meredith Whitney's downgrade of the largest securities firm.
``As the recession unfolds, then profits will disappoint,'' Stuart Schweitzer, who helps oversee $420 billion as the global markets strategist at JPMorgan Private Bank, said in a Bloomberg Television interview from New York. ``It's already under way.''
The S&P 500 lost 23.77, or 1.7 percent, to 1,357.05 at 10:24 a.m. in New York. The Dow Jones Industrial Average decreased 209.81, or 1.7 percent, to 12,425.35. The Nasdaq Composite Index slipped 32.45, or 1.4 percent, to 2,350.4. Shares also fell in Asia and Europe.
About six stocks dropped for every one that rose on the New York Stock Exchange after the ISM's non-manufacturing index, which reflects almost 90 percent of the economy, fell to 41.9 from 54.4 the prior month. A reading of 50 is the dividing line between growth and contraction.
GE, the second-largest U.S. company by market value, dropped 59 cents to $34.78. AT&T, the nation's biggest phone company, declined $1.09 to $37.07.
Energy Shares Slump
Crude oil for March delivery fell 1.7 percent to $88.47 a barrel in New York after the ISM report bolstered speculation fuel demand will slow in the U.S., the world's biggest energy consumer. Gold and copper prices also declined, dragging down shares of mining companies.
Exxon Mobil Corp., the biggest U.S. energy company, lost $1.49 to $83.95. Chevron Corp., the second-largest, declined $1.74 to $80.28. Freeport-McMoRan Copper & Gold Inc. retreated $3.85 to $87.33. Newmont Mining Corp. fell $1.04 to $49.87.
Goldman dropped $6.17 to $194.63. The firm was cut to ``perform'' from ``outperform'' by Oppenheimer's Whitney. The stock's valuation ``will not be sustainable in a year when Goldman Sachs will probably deliver results that will not be substantially better than its peers,'' Whitney wrote in a note dated Feb. 4.
Citigroup Inc., the biggest U.S. bank by assets, lost 73 cents to $28.49. Merrill Lynch & Co., the nation's third-largest securities firm, dropped $1.79 to $55.94. The S&P 500 Financials Index retreated 2.7 percent.
Ratings Watch
Banks and brokerages also retreated after Fitch Ratings said collateralized debt obligations may be downgraded as many as five levels. The biggest cuts will be to AAA rated CDOs that are based on credit-default swaps and aren't actively managed, according to ratings guidelines proposed by Fitch today. CDOs that package high-yield assets may be cut as many as three levels for the portions first in line for losses.
National Semiconductor Corp. fell 72 cents to $18.30. The maker of chips for devices such as Apple Inc.'s iPhone said revenue this quarter will be as much as $455 million. That's below the $484 million average estimate of analysts in a Bloomberg survey. The company on Dec. 6 forecast sales of $474 million to $495 million.
Texas Instruments Inc., the biggest maker of mobile-phone chips, dropped 88 cents to $30.28. Intel Corp., the world's largest chipmaker, lost 40 cents to $20.67.
Fed Bets
Traders boosted bets on Federal Reserve interest-rate cuts after the ISM report. Fed funds futures indicate a 98 percent chance policy makers will lower the target for overnight loans between banks by 0.5 percentage point to 2.5 percent by its March 18 policy meeting. That compares with 68 percent odds yesterday. The rest of the bets are for a quarter-point reduction.
General Motors Corp. slipped 66 cents to $26.91. GMAC LLC, the lending company that General Motors Corp. sold to a hedge fund manager, lost $724 million in the fourth quarter because home buyers didn't keep up with their mortgage payments. A group led by Cerberus Capital Management bought a 51 percent stake in GMAC in 2006.
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