EFinancialInvestment

U.S. stocks fell and the Standard & Poor’s 500 Index slid below its lowest close since 2003 on growing concern over the fate of the nation’s car industry and economic data signaling the recession is deepening.

General Motors Corp. tumbled as much as 18 percent to its lowest price since 1942, while Ford Motor Co. lost 25 percent. Citigroup Inc. slid 16 percent to $7.05, a 13-year low, on a plan to buy $17.4 billion of assets from structured investment vehicles it advises. Government reports showing the biggest decrease in consumer prices and the fewest housing starts on record sent JPMorgan Chase & Co., Cisco Systems Inc. and General Electric Co. to declines of as much as 9.6 percent.

The S&P 500 slipped 3.4 percent to 830.19 at 2:18 p.m. in New York, extending its 2008 retreat to almost 44 percent. The Dow Jones Industrial Average lost 201.83 points, or 2.4 percent, to 8,222.92. The Nasdaq Composite Index decreased 3.7 percent to 1,427.92. Eleven stocks fell for each that rose on the New York Stock Exchange.

“As the authorities try to find ways of stimulating the economy, sustained deflation would be a concern” as consumers “hold off purchases now hoping to get lower prices later,” said Jeffrey Coons, co-director of research at Manning & Napier Advisors Inc. in Fairport, New York, which manages $18 billion. “The corporate profit environment is going to be bleak for the same reason we’ve got inflationary pressure coming off the economy.”

Global Declines

The retreat in the U.S. followed declines in Europe and Asia as concern mounted the economic slowdown will cut profits at financial firms and commodity producers. The S&P 500, Dow and Nasdaq each slid below their lowest closing levels in more than five years yesterday before a late-day rally spurred by index funds buying shares to replace Anheuser-Busch Cos., which was dropped from the S&P 500 after its takeover by InBev NV.

Federal Reserve policy makers last month predicted the U.S. economy will contract through the middle of 2009, with some prepared to cut interest rates further in response, according to a record of their meeting released today.

JPMorgan, the largest U.S. bank by market value, tumbled 8.6 percent to $29.37. Cisco, the biggest maker of networking equipment, retreated 5.4 percent to $15.57. GE, the largest maker of power-generation equipment, fell $1.22, or 7.6 percent, to $14.84.

SIV Slump

Citigroup, which was surpassed by US Bancorp today as the nation’s fourth-largest bank by market value, retreated to its lowest price since 1995, three years before Citicorp Inc.’s merger with Sanford “Sandy” Weill’s Travelers Group Inc.

Citigroup said the value of the SIV assets it agreed to buy fell from $21.5 billion as of Sept. 30, reflecting market declines of $1.1 billion and $3 billion in debt that matured or was sold. SIVs, which Citigroup invented in 1988, emerged 15 months ago as one of the first major strains in credit markets rocked by record high foreclosures on subprime mortgages.

The bigger-than-forecast drop in the consumer price index was triggered by a plunge in fuel costs and discounts on automobiles and clothing to entice consumers amid a weakening economy. Excluding food and energy, so-called core prices unexpectedly fell for the first time since 1982.

U.S. builders in October broke ground on the fewest new homes and obtained permits for future construction at the lowest levels on record, signs the housing slump may extend into a fourth year. Construction starts on housing fell 4.5 percent in October, less than economists forecast, to an annual rate of 791,000 that was the lowest since records began in 1959, the Commerce Department said. Building permits, a sign of future residential projects, dropped 12 percent to a 708,000 pace, the lowest since at least 1960.

Auto Concern

General Motors retreated as much as 57 cents to $2.52, below its lowest closing price since November 1942, according to Global Financial Data in Los Angeles. Chief Executive Officer Rick Wagoner and fellow auto-industry leaders are urgently seeking a slice of the $700 billion government bailout package.

Ford, the second-biggest U.S. automaker, dropped 39 cents, or 23 percent, to $1.29.

Congressional Democrats propose tapping the financial- rescue package for the aid. President George W. Bush and Senate Republicans said they oppose that approach and instead prefer using $25 billion that was earlier approved by Congress to retool auto plants.

Car company executives are making their plea for government aid for the second day, as prospects for a Democratic-backed assistance plan waned. Ford Motor Co.’s Alan Mulally and Robert Nardelli of Chrysler LLC join Wagoner in testifying at a House Financial Services Committee hearing after telling a Senate panel yesterday that they need $25 billion to keep operating.

`Soap Opera’

“The continuing soap opera that’s playing out in Washington with the automobile manufacturing management testifying today before Congress is sowing further uncertainty,” said Marshall Front, who oversees $700 million as chairman of Front Barnett Associates in Chicago. “I think it’s probably preoccupying most people at this point.”

The S&P 500 has dropped more than 47 percent from its 2007 record as earnings for companies in the index decreased for five straight quarters and worldwide writedowns and credit losses topped $966 billion in the worst financial crisis since the Great Depression.

Profits fell 17 percent on average at companies in the index that have reported third-quarter results, according to Bloomberg data. Analysts expect a 9.5 percent decline in full- year earnings, based on estimates compiled by Bloomberg.

CA Inc. gained the most in the S&P 500, rising 4.6 percent to $15.97. The second-largest maker of software for mainframe computers was boosted to “strong buy” from “outperform” by Raymond James Financial Inc. analyst Michael Turits, who said the company is “well positioned” amid an economic slowdown.