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Summary of US markets for you all for easy reference. Based on global cues , our market too looks very bad. 

 

U.S. Stocks Retreat Following Bernanke's Warning on Banks

March 3 (Bloomberg) -- U.S. stocks retreated for a fifth day as Federal Reserve Chairman Ben S. Bernanke said the banking system still hasn't stabilized, offsetting gains in commodity shares on speculation China will boost demand for raw materials.

Goldman Sachs Group Inc. and MetLife Inc. dragged a gauge of financial companies in the Standard & Poor's 500 Index to its lowest level since 1992. Home Depot Inc. fell more than 4.6 percent for a second day as fewer Americans than forecast signed contracts to buy previously owned homes. Freeport-McMoRan Copper & Gold Inc. jumped 7.3 percent as China, the world's largest consumer of copper, said its economy will recover this year.

"The prevailing mood now is that the government doesn't have enough bullets to deal with the problem," said Hayes Miller, who helps manage $30.4 billion at Baring Asset Management Inc. in Boston. "There are too many uncertainties and I don't think any particular plan is going to wipe the slate clean."

The S&P 500 slid 0.6 percent to 696.33, its first close below 700 since October 1996. The Dow Jones Industrial Average lost 37.27 points, or 0.6 percent, to an almost 12-year low of 6,726.02. The Russell 2000 Index slipped 1.9 percent. Almost two stocks fell for each that rose on the New York Stock Exchange.

The S&P 500 climbed as much as 1.6 percent in early trading after yesterday's sell-off left companies in the index valued at their cheapest relative to earnings since 1986. The index traded at 12.2 times company profits from the past 10 years as of yesterday's close, according to data compiled by Yale University professor Robert Shiller, who uses a decade of profits to smooth out short-term fluctuations.

Rally Reversed

The early rally was erased after Bernanke, testifying before the Senate Budget Committee, spurred concern that the government won't be able to shore up a financial system battered by $1.1 trillion in global credit losses.

Goldman Sachs lost 4.5 percent to $82.37, while MetLife fell 17 percent to $13.72.

"Those comments that we clearly haven't stabilized are clearly taking the market down," said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages $2 billion in San Antonio.

Banks are leading S&P 500 companies to their first cumulative quarterly net loss. The 78 financial companies in the index that reported results lost a combined $50.5 billion, their third straight quarterly shortfall, according to data compiled by Bloomberg.

Financials Retreat

The S&P 500 Financials Index retreated 1.6 percent for its third straight drop. The Fed said today its $1 trillion program to prop up the market for consumer and business loans will start disbursing funds March 25 and will probably accept securities backed by vehicle-fleet and equipment leases.

Bernanke and his colleagues, after cutting the Fed's benchmark interest rates almost to zero, are counting on the Term Asset-Backed Securities Loan Facility to help revive credit and end what may become the deepest U.S. recession since World War II.

Bernanke said policy makers may need to expand aid to the banking system beyond the $700 billion already approved and take other aggressive measures even at the cost of soaring fiscal deficits, according to his Senate testimony.

'Skepticism Reigns'

"Skepticism reigns supreme right now," said William Dwyer, senior investment office at Baltimore-based MTB Investment Advisors Inc., which oversees $24 billion. "I don't see any sustained recovery in the near term. We haven't even cleared out the bad asset on the financial side."

Home Depot dropped $1.03 to $18.89. The index of pending home resales fell 7.7 percent after a 4.8 percent gain in December, the National Association of Realtors said today in Washington.

Life insurers fell as they are forced set aside more funds to cover potential payouts to customers with minimum-return guarantees on financial products linked to the performance of stocks.

With the S&P 500 below 700, those guarantees absorb nearly all of the excess capital at Prudential Financial Inc. and Hartford Financial Services Group Inc., according to Randy Binner, an analyst at Friedman, Billings, Ramsey Group Inc. Prudential lost 13 percent to $12.90 and Hartford slumped 9.4 percent to $4.63.

General Electric Co. had the biggest loss in the Dow average, falling 7.8 percent on speculation that its finance division needs more capital. Trading of put options, which give the right to sell the stock at a set price and date, rose to a record 459,871 and the second-most active options were contracts that give the right to sell the stock at $2.50 by June. Those options rose 30 percent to 26 cents.

Material Producers Advance

Mining shares advanced as copper jumped the most in three weeks on speculation that China will buy more raw materials as the country's 4 trillion yuan ($585 billion) stimulus plan takes effect. The Reuters/Jefferies CRB Index of 19 commodities added 1.7 percent. Freeport-McMoRan rallied $1.92 to $28.41 and Southern Copper Corp. added $1.01, or 7.9 percent, to $13.75.

China's economy, being dragged down by its worst export slump in more than a decade, will rebound this year, officials said. The government is "confident" of achieving its 8 percent growth target, Minister of Industry and Information Li Yizhong said.

Producers of raw materials added 0.6 percent for the steepest advance among 10 industries in the S&P 500.

'Bright Spot'

The group is a "possible bright spot," said William Dwyer, senior investment office at Baltimore-based MTB Investment Advisors Inc., which oversees $24 billion. "It is going to hinge on incremental demand increases and people are looking at the stimulus in China to start it."

Dell Inc. rose 8.5 percent to $9.15. The second-largest maker of personal computers said the PC market is "challenging" and that products such as low-cost netbooks and storage devices may help boost profit.

The Dow average dropped below 7,000 for the first time since 1997 yesterday after Warren Buffett said the economy is in "shambles" and American International Group Inc. posted the largest corporate loss in U.S. history.

The deepening global recession, a third government rescue for Citigroup and dividend cuts at companies from General Electric Co. to JPMorgan Chase & Co. have dragged the S&P 500 to three consecutive weeks of declines, pushing the index down 23 percent this year.

The S&P 500 was "oversold" yesterday if its relative strength index is any indication, Michael O'Rourke, chief market strategist at New York-based BTIG LLC said. The S&P 500's 14-day relative strength index, or RSI, fell to 27.47 yesterday, below the level of 30 that some traders use as a signal to buy. The RSI slid to 26.94 today.

Obama Says Buy

President Obama said "buying stocks is a potentially good deal if you've got a long term perspective." He spoke at a press briefing in Washington while meeting U.K. Prime Minister Gordon Brown.

"At some point, there will be light at the end of the tunnel so companies with high-quality balance sheets give comfort that the company will make through this recession," said Michael Santelli, who manages $250 million at Allegiant Asset Management in Cleveland.

The S&P 500 has dropped almost 56 percent since its October 2007 record close as the U.S., Europe and Japan fell into the first simultaneous recessions since World War II.

Earnings Slump

Profits among S&P 500 companies may decrease 34.8 percent in the first quarter and 14.7 percent for all of 2009, according to analyst estimates compiled by Bloomberg. At the start of the year, analysts predicted first-quarter earnings would retreat 10.3 percent and foresaw a 4.5 percent increase in 2009 income.

The projections would represent nine consecutive quarters of lower earnings, the longest streak since at least 1947. Profits trailed analysts' forecast for 32 percent of S&P 500 companies in the fourth quarter, the most since the fourth quarter of 1997, according to data compiled by Bloomberg.

"The economic environment is poor, the earnings outlook is poor and the technicals are poor," said Walter "Bucky" Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. "I just see continued weakness."

To contact the reporters on this story: Cristina Alesci in New York at calesci2@bloomberg.net Jeff Kearns in New York at jkearns3@bloomberg.net .

Jagruti Fadia .