(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, March 28 (Reuters) - U.S. stocks fell on Friday
as a dour reading on consumer sentiment, reinforced by a profit
warning from retailer J.C. Penney, renewed recession concerns,
while the dollar edged lower on the weak U.S. economic
outlook.
U.S. Treasury debt prices rose as investors once again
turned to the safety of bonds amid persistent worries about the
health of the U.S. financial sector.
Gold fell more than 2 percent in a broad commodities
sell-off and oil tumbled almost 2 percent.
Financial stocks were again battered after a prominent
Oppenheimer & Co analyst warned about the health of big U.S.
commercial banks.
The clouded outlook for corporate earnings, amid the
downturn in consumer sentiment, set the day's tone. Analysts
also said investors did not want to hold positions, especially
in financial stocks, ahead of the weekend.
"We've had a lot of trepidation in the market," said Tim
Smalls, head of U.S. stock trading at brokerage firm Execution
LLC in Greenwich, Connecticut. "And with what we've seen in the
marketplace over the past few months, not very many people are
going to be willing to take new positions going into the
weekend."
The Dow Jones industrial average <> fell 86.06 points,
or 0.70 percent, to 12,216.40. The Standard & Poor's 500 Index
<.SPX> shed 10.55 points, or 0.80 percent, to 1,315.21. The
Nasdaq Composite Index <> declined 19.65 points, or 0.86
percent, to 2,261.18.
U.S. consumer confidence slipped further into recessionary
territory in March, hitting a 16-year low, even as other data
showed incomes rose and inflation slowed in February, which
should support Federal Reserve efforts to bolster the economy.
The dollar fell against a basket of major trading-partner
currencies, with the U.S. Dollar Index <.DXY> down 0.07
percent.
The euro <EUR=> rose 0.11 percent to $1.5797, and against
the Japanese yen the dollar <JPY=> fell 0.38 percent to 99.23.
Citigroup Inc <C.N>, Wachovia Corp <WB.N> and other U.S.
banks are likely to announce dividend cuts in April because
their earnings will not support currently scheduled payouts,
Oppenheimer & Co analyst Meredith Whitney said.
"We continue to believe the bad news is not priced into the
bank stock prices and that progressively throughout this year,
all financials -- but particularly banks -- will trade ... at
least 25 percent lower from current levels," she said.
Whitney correctly predicted in October that Citigroup would
cut its dividend and need to raise $30 billion of capital.
Shares of retailer J.C. Penney Co Inc <JCP.N> fell more
than 7 percent after the company cut its first-quarter earnings
outlook following weak Easter sales and said it expects the
environment to remain difficult throughout 2008.
That stoked fears the second half of the year will not
bring relief to the flagging U.S. economy.
U.S. Treasury debt rose in a safe-haven bid. Longer-dated
bonds, which are more vulnerable to inflation, were also helped
by data early in the day showing price pressures abating last
month.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
17/32, with the yield at 3.4583 percent. The 2-year U.S.
Treasury note <US2YT=RR> was up 2/32, with the yield at 1.6663
percent.
European stocks fell as inflationary pressures in Germany
dampened hopes for a European Central Bank rate cut any time
soon, while banks and oil stocks also lost ground.
The FTSEurofirst 300 index <> closed down 0.5 percent
at 1,265.47 points. But for the week, the index rose 3.2
percent -- its first weekly gain in five weeks and its largest
weekly increase since early December.
E.ON <EONG.DE>, the world's largest utility, said profits
this year would be at the lower end of its forecast range. Its
shares fell 2.5 percent.
Shorter-dated euro zone government bond yields rose as
traders trimmed bets for an early interest rate cut.
Asian stocks staged a tentative recovery before the
quarter's end and bonds fell amid optimism the impact of a U.S.
recession and a widening credit crisis in Asia were overdone.
Tokyo's Nikkei <> recovered from an early fall to
close 1.7 percent higher, while MSCI's index of other Asian
shares <.MSCIAPJ> rose 0.97 percent.
But the MSCI benchmark for shares outside Japan is poised
for its biggest quarterly fall in five years on a mix of
worries nagging investors worldwide: the health of the global
financial system, rising inflation and a murky corporate profit
outlook.
Oil tumbled even as the flow of crude through an Iraqi
pipeline system disrupted by a bomb on Thursday was restored.
Crude for May delivery <CLK8> in New York ended three
straight days of gains and settled down $1.96 at $105.62 a
barrel. New York crude hit a record $111.80 on March 17.
In London, May Brent crude <LCOK8> ended down $1.23 at
$103.77 a barrel.
Spot gold prices <XAU=> fell 1.75 percent to $930.80 an
ounce.
(Writing by Herbert Lash; Editing by Dan Grebler)
