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US stocks fell on Friday and were poised for their first fourth-quarter decline since 2000 after Government reports on durable goods and unemployment reinforced speculation the housing-market collapse will push the economy into recession.
Citigroup, JPMorgan Chase and Merrill Lynch dropped after Goldman Sachs Group analyst William Tanona predicted the firms might write down an additional US$34 billion of assets linked to subprime mortgages.
KB Home and Macy's led builders and retailers lower after falling home prices and sales heightened concern that sinking property values would slow consumer spending.
The Standard & Poor's 500 Index has declined 3.2 per cent since the end of September, paring its 2007 advance to 4.2 per cent.
"It's a struggle right now," said Edward Hemmelgarn, who oversees about US$350 million as president of Shaker Investments in Cleveland. "If you look at the economic news, most of it is more negative."
The S&P 500 dropped 0.4 per cent to 1478.49 last week. The Dow Jones Industrial Average slipped 0.6 per cent to 13,365.87. The Nasdaq Composite Index lost 0.7 per cent to 2674.46.
The declines left the S&P 500 5.5 per cent below its all-time closing high of 1565.15 on October 9. The index has rebounded 5.1 per cent in a month as traders boosted bets the Federal Reserve will reduce interest rates next year to stoke the economy.
The Commerce Department said two days ago that orders for cars, aircraft and other items made to last several years increased 0.1 per cent last month, less than the 2 per cent median estimate in a Bloomberg survey.
The number of Americans filing first-time claims for unemployment insurance increased by 1000 to 349,000, the Labor Department reported. Economists forecast initial claims would fall to 340,000.
Citigroup, the biggest US bank by assets, dropped 3.1 per cent to a five-year low of US$29.29. JPMorgan, the third-biggest lender, declined 1.9 per cent to US$43.26. Merrill, the world's largest brokerage, lost 4.6 per cent to US$52.97. Citigroup could reduce the value of its holdings by US$18.7 billion in the fourth quarter and cut its dividend 40 per cent to preserve capital, Goldman's Tanona said in a December 26 report.
JPMorgan could write off US$3.4 billion, while Merrill might reduce its holdings by US$11.5 billion, the analyst wrote.
Losses and writedowns at the world's biggest banks and securities firms total US$97 billion this year, according to data compiled by Bloomberg. Financial shares in the S&P 500 dropped 1.4 per cent this week, bringing their 2007 decline to 21 per cent.
That's the biggest annual plunge since 24 per cent in 1990.
