(Updates to close)
By Ellis Mnyandu
NEW YORK, May 5 (Reuters) - U.S. stocks fell on Monday on
worry that Bank of America Corp <BAC.N> may walk away from
buying troubled lender Countrywide Financial Corp <CFC.N>,
while record oil prices above $120 a barrel increased worry
about consumer spending.
Microsoft's <MSFT.O> decision to abandon its $50 billion
offer to buy Yahoo Inc <YHOO.O> 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 U.S. bank, was
likely to renegotiate its deal to buy Countrywide, the largest
U.S. 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 <C.N>, down
2.4 percent, led a broader retreat in banking stocks, with the
S&P financial index <.GSPF> off 1.5 percent.
Berkshire Hathaway's <BRKa.N><BRKb.N> 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 <AIG.N>, 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 <.SPX> 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 <GOOG.O>, 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 <.RLX>
fell 2.4 percent.
Shares of Home Depot Inc <HD.N>, the top home improvement
chain, declined 2.5 percent to $29.37 on the NYSE, while
shares of Wal-Mart Stores Inc <WMT.N>, the world's largest
retailer, dropped 0.9 percent to $56.97.
U.S. 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 <CLM8> 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 U.S. 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 handes, 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.
(Reporting by Ellis Mnyandu; Editing by Jan Paschal)
