INTERSPAGO

US stocks fall on Countrywide fears, record oil


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Microsoft's decision to abandon its $50 billion offer to buy Yahoo Inc added to gloom, causing the market to break a two-day winning streak. Financial stocks felt the brunt of the sell-off after a brokerage said Bank of America, the No. 2 US bank, was likely to renegotiate its deal to buy Countrywide, the largest US mortgage company, or might even scrap the deal altogether. For details, see . Countrywide shares tumbled more than 10 percent, while Bank of America shares slid 2.1 percent. Citigroup, down 2.4 percent, led a broader retreat in banking stocks, with the S&P financial index off 1.5 percent. Berkshire Hathaway's shares fell more than 2 percent after Warren Buffett's holding company posted a big drop in earnings, largely on weakness in its insurance operations. American International Group Inc, due to report earnings on Thursday, fell 3.4 percent. If Bank of America were to walk away from the Countrywide deal, "what would that mean?" said Stephen Massocca, co-chief executive of Pacific Growth Equities, a San Francisco-based investment bank. "Nobody knows. It may be that there are reasonable answers to all this, but if that were to happen, that won't be good for the market." The Dow Jones industrial average finished down 88.66 points, or 0.68 percent, at 12,969.54. The Standard & Poor's 500 Index shed 6.41 points, or 0.45 percent, to 1,407.49. The Nasdaq Composite Index lost 12.87 points, or 0.52 percent, to 2,464.12. When the Countrywide buyout was announced in January, it reassured investors that an outright collapse of the mortgage company would be averted. Countrywide shares slid to $5.36 on the New York Stock Exchange, while shares of Bank of America declined to $38.97. Citigroup shares dropped to $25.75, while AIG shares ended down at $47.39. Berkshire's Class A shares finished down 2.7 percent at $130,000 on the NYSE, while its Class B shares declined 2.6 percent to $4,333.50. On the Nasdaq, Yahoo shares suffered their biggest decline in nearly two years, finishing down 15 percent at $24.37. Shares of Microsoft slipped 0.6 percent to $29.08. Shares of Google Inc, a competitor of both Yahoo and Microsoft, ended up 2.3 percent at $594.90 on expectations that the company could benefit from the failure of the Microsoft-Yahoo talks. Yahoo was likely to push for an advertising partnership with the Web search company, sources familiar with the matter said. Shares of consumer-oriented companies, including retailers, also slid as investors feared higher energy prices may cause consumers to cut spending, a key pillar of corporate profits and economic activity. The S&P retail index fell 2.4 percent. Shares of Home Depot Inc, the top home improvement chain, declined 2.5 percent to $29.37 on the NYSE, while shares of Wal-Mart Stores Inc, the world's largest retailer, dropped 0.9 percent to $56.97. US crude for June delivery settled at a record just below $120 a barrel amid a weak dollar and renewed tensions with Iran. On the New York Mercantile Exchange, the June crude contract surged $3.65 to settle at $119.97 a barrel, after earlier climbing to $120.36, a fresh all-time peak. Earlier in the session, the stock market had trimmed losses briefly when a report from the Institute for Supply Management showed unexpected growth in the vast US services sector last month. The ISM's non-manufacturing index came in at an April reading of 52.0, confounding economists' forecasts for a reading of 49.1, and up from 49.6 in March. A reading above 50 indicates growth. Volume was modest on the NSYE, where about 1.11 billion shares changed hands, below last year's estimated daily average of 1.90 billion. On the Nasdaq, about 2.08 billion shares traded, slightly below last year's daily average of 2.17 billion. Decliners outnumbered advancers on the NYSE by a ratio of about 3 to 2, while on the Nasdaq, about four stocks fell for every three that rose.