By Whitney Kisling Aug. 11 (Bloomberg) — U.S. stocks fell the most in a month, led by financial shares, after JPMorgan Chase & Co. said credit losses may overwhelm capital at MBIA Inc. and analyst Dick Bove said bank earnings won’t improve in the second half of the year. MBIA, the biggest bond insurer, tumbled 16 percent after JPMorgan cut the shares to “underweight.†All 24 companies in the KBW Bank Index dropped after Bove, an analyst at Rochdale Securities, said shares of lenders will probably retreat. CIT Group Inc., the commercial lender trying to avoid a collapse, slid 20 percent after delaying its earnings report. Sprint Nextel Corp. and Yum! Brands Inc. slumped on analyst downgrades. The Standard & Poor’s 500 Index lost 1.2 percent, the most since July 7, to 994.75 at 1:45 p.m. in New York. The Dow Jones Industrial Average sank 88.95 points, or 1 percent, to 9,249. Almost six stocks fell for each that rose on the New York Stock Exchange, the broadest retreat in a month. “Most companies have beat earnings estimates, but they did it through cost savings,†said Alan Gayle , the Richmond, Virginia-based director of asset allocation at Ridgeworth Investments, which manages $60 billion. “Market expectations are being raised. The pressure is going to be on now that the consensus is we’re beginning a recovery.†U.S. stocks declined yesterday, led by commodity producers and retailers, after four weeks of gains left the S&P 500 trading at the highest level relative to earnings since 2004. The measure was valued at 18.6 times the profits of its companies on Aug. 7, according to Bloomberg data. Beating Estimates Earnings per share topped analysts’ estimates by 10 percent on average for the 450 companies in the S&P 500 that released results since June 17, according to data compiled by Bloomberg. Profits slumped 30 percent in the period, a record eighth straight quarter of declining earnings, and sales declined 16 percent. MBIA declined 16 percent to $5.21, the biggest drop since April 20, after JPMorgan cut the shares to “underweight†from “neutral,†saying there is “little value†in the company’s equity because mortgage and credit losses eventually may overwhelm its capital. MBIA fell the most in a group of S&P 500 financial shares, which lost 3.1 percent for the steepest decline among 10 groups. American International Group Inc., the insurer rescued by the government, slipped 13 percent to $24.88. CIT said it is delaying a quarterly report as it works with bondholders on a restructuring plan. The shares dropped 20 percent to $1.18. Running on ‘Fumes’ The KBW Bank Index fell 4.2 percent, the most in almost three weeks, after Bove said bank shares have been rallying on “fumes,†not fundamentals. Earnings won’t improve in the third and fourth quarters, Bove wrote in a note, and he forecast a short-term decline in their shares. Wells Fargo & Co . lost 5.1 percent to $27.17 and BB&T Corp. dropped 3.6 percent to $24.98. Bank of America Corp. fell the most on the Dow, dropping 3.7 percent to $16.06. The Charlotte, North Carolina-based bank has more than quadrupled since March 9. “The rational investor would step away from psychology at this point and take some profits,†Bove said in the note. Equities fell even after productivity of U.S. workers grew in the second quarter at the fastest pace in almost six years as employers squeezed more out of remaining staff to bolster profits. Productivity rose at an annual 6.4 percent pace, more than forecast, after a 0.3 percent gain the prior three months, Labor Department data showed. Labor costs fell 5.8 percent, the most in eight years. Wholesale Inventories A separate government report showed inventories at U.S. wholesalers fell in June for a tenth straight month as a gain in sales helped distributors move out more of their excess supply. The benchmark index for U.S. stock options headed for its biggest jump in six weeks. The VIX, as the Chicago Board Options Exchange Volatility Index is known, climbed 6.9 percent to 26.47. The index, which measures the cost of using options as insurance against declines in the S&P 500 , is down from a record 80.86 in November yet above its 20.22 average over its 19-year history. Sprint Nextel lost 3 percent to $3.60 as Piper Jaffray Cos. cut its recommendation to “underweight†from “neutral.†Sprint has fallen for five straight days, the longest streak since December. Yum! Brands Inc. , the owner of the Taco Bell restaurant chain, dropped 4.7 percent to $34.82 after its shares were cut to “neutral†from “buy†at UBS AG, which cited “sluggish†U.S. sales. Fourth Straight Decline Exxon Mobil Corp. declined 0.9 percent to $68.13 as the price of crude oil tumbled for a fourth straight day. The Organization of Petroleum Exporting Countries raised its 2010 forecast for supply from outside the group. Crude for September delivery fell 1.9 percent to $69.23 a barrel. A group of energy companies slid 1.7 percent, with Chevron Corp. losing 2 percent to $67.82, and ConocoPhillips dropping 1.1 percent to $43.72. Fluor Corp., the largest publicly traded U.S. engineering firm, helped drag a group of industrial shares down 1.5 percent. Fluor’s second-quarter profit fell 19 percent from a year earlier and sales trailed analysts’ estimates as oil and gas work slowed. Fluor shares slipped 5.2 percent to $54.51, while General Electric Co. lost 3.6 percent to $14.04. Caterpillar Inc., the biggest maker of construction equipment, dropped 2.6 percent to $45.94. Lions Gate Entertainment Corp., the biggest independent movie studio, climbed 2.2 percent to $6.60 after it reported a first-quarter profit on higher television revenue and the addition of the TV Guide channel. Analysts forecast a loss. The S&P 500 must rally 57 percent to surpass its all-time high of 1,565.15 set on Oct. 9, 2007. Before November, it had remained above 1,000 for five years. The gauge jumped 49 percent from a 12-year low on March 9 through last week, the steepest surge since the Great Depression, as three quarters of its companies that posted second-quarter earnings beat consensus analyst estimates. To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net .
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Stocks in U.S. Fall on JPMorgan MBIA Downgrade, Outlook for Bank Earnings
