Bloomberg U.S. Stocks Tumble as Financials, Commodity Shares Retreat

April 20 (Bloomberg) -- U.S. stocks tumbled, led by the biggest drop in financial shares in three months, as concern grew that credit losses are worsening and lower commodity prices dragged down energy and material producers.

Bank of America Corp., the lender that lost more than three-quarters of its market value in the past year, plunged 24 percent as rising charge-offs for bad loans overshadowed better- than-estimated earnings. Citigroup Inc. dropped 19 percent after Goldman Sachs Group Inc. said the bank’s credit losses are growing at a “rapid rate.” U.S. Steel Corp. and Exxon Mobil Corp. declined as oil and industrial metal prices decreased.

“The market seems to follow the direction of financial stocks one way or another,” said Keith Wirtz, who helps oversee $20 billion as chief investment officer at Fifth Third Asset Management in Cincinnati. “There are definitely more writedowns ahead and more challenges for the loan portfolios, particularly in the consumer side of the equation.”

The Standard & Poor’s 500 Index slid 4.3 percent to 832.39, its steepest tumble since March 2. The Dow Jones Industrial Average lost 289.6 points, or 3.6 percent, to 7,841.73. The Russell 2000 Index retreated 5.6 percent. About 20 stocks fell for each that gained on the New York Stock Exchange, the broadest decline since Feb. 10.

Benchmark indexes opened lower and extended declines in early trading after the Conference Board’s gauge of leading economic indicators fell more than forecast.

VIX Rebounds
The VIX, which measures the cost of using options as insurance against declines in the S&P 500, jumped 15 percent to 39.18 for its steepest advance in three months. The index, which has fallen for four straight weeks, closed at a six-month low on April 17.

The S&P 500 wrapped up its steepest six-week gain since 1938 on April 17, as profits at Goldman Sachs and JPMorgan Chase & Co. ignited gains in bank shares. The rally may falter as a prolonged recession dents corporate earnings, George Hoguet, global investment strategist at Boston-based State Street Global Advisors Inc., said in an April 18 interview.

The S&P 500 surged 29 percent from a 12-year low on March 9 through last week as expectations grew that the worst of a global recession is past. The rally came even as analysts estimate that profits at S&P 500 companies decreased for the seventh straight quarter in the January to March period, the longest stretch of declines since at least the Great Depression.

‘Period of Consolidation’
“We’re going to get a lot of earnings releases this week and by and large they’re going to be disappointing,” said Stanley Nabi, vice chairman of Silvercrest Asset Management Group, which oversees $8 billion in New York. “Besides, we’ve had a very sharp run-up in the market. So I see a period of consolidation now, maybe a week or two of declines.”