Diary of a JSE Stock Operator Edition 9: U.S. Stocks Pare Declines; Exxon Retreats, Financials Gain

(Bloomberg) -- U.S. stocks fell for a fifth day, the longest streak of declines in 11 months, as growing concern about the slowing economy prompted the Federal Reserve to cut interest rates by the most in two decades.

The Standard & Poor's 500 Index pared its worst loss in five years after some investors were persuaded the Fed would continue cutting rates after its emergency reduction today. Exxon Mobil Corp., Microsoft Corp. and AT&T Inc. led declines. Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. helped carry financial shares higher for the first time in three days after the Fed cut its benchmark rate by 0.75 percentage point.

``It shows that they're trying to stem the negative sentiment that's out there that there's a recession under way,'' said Ed Peters, chief investment officer at PanAgora Asset Management in Boston, which manages $25 billion.

The S&P 500 retreated 23, or 1.7 percent, to 1,302.19 at 12 p.m. in New York. The Dow Jones Industrial Average decreased 179, or 1.5 percent, to 11,920.3. The Nasdaq Composite Index lost 56.66, or 2.4 percent, to 2, 283.36. About three stocks fell for every two that rose on the New York Stock Exchange.

Growing evidence that the U.S. economy is slowing has dragged more than half of the world's biggest stock indexes into a bear market and wiped out $7.3 trillion in global stock-market value this year.

`Increasing Downside Risks'

The Fed cited ``a weakening of the economic outlook and increasing downside risks to growth'' for its first emergency cut since 2001. Policy makers weren't scheduled to gather on rates until Jan. 29-30.

The U.S. market was closed for Martin Luther King Day yesterday. Stocks posted the steepest weekly drop since July 2002 last week after lower-than-estimated home construction, retail sales and manufacturing reinforced speculation that the economy is contracting.

Exxon, the largest U.S. crude producer, decreased $2.48 to $82.60. Chevron Corp., the second biggest, lost $2.96 to $80.50. Crude oil dropped to a six-week low, falling $2.39 to $88.18 a barrel in New York, on concern demand will diminish in an economic slowdown.

Microsoft, the biggest software company, retreated $1.04 to $31.87. AT&T slid 78 cents to $35.33.

Bank of America

Bank of America gained 87 cents, or 2.4 percent, to $36.84 even after reporting earnings that fell 97 percent. Fourth- quarter net income slumped to $268 million, or 5 cents a share, from $5.26 billion, or $1.16, a year earlier the bank said in a statement. Excluding merger and restructuring costs and a gain from the sale of Marsico Capital Management LLC, the company earned 5 cents a share, missing the 21-cent average estimate of analysts surveyed by Bloomberg.

Wells Fargo, the biggest bank on the West Coast, rose $1.35 to $26.83. JPMorgan, the third-largest U.S. bank, increased $1.30 to $40.89.

The MSCI World Index fell 0.6 percent. The Dow Jones Stoxx 600 Index of European shares added 2.4 percent.

The Nasdaq Composite today entered a so-called bear market, marked by a decline of at least 20 percent from a high. The S&P 500 and Dow average have both lost about 16 percent from their Oct. 9 records. The Nasdaq reached an almost seven-year high on Oct. 31.

Wachovia Corp., the fourth-largest U.S. bank, said profit fell 98 percent after writedowns for bad loans and mortgage- backed securities. Its shares added 15 cents to $30.95.