World Crisis Online

By Rita Nazareth

March 4 (Bloomberg) — U.S. stocks declined, erasing almost half of the biggest daily gain in three months, amid investor concern that the surge in crude oil price to a 29-month high will curtail the expansion in the world’s biggest economy.

Caterpillar Inc. and General Electric Co. slumped at least 1.1 percent, pacing declines in industrial companies, which are among stocks most dependent on economic growth. Citigroup Inc. and Goldman Sachs Group Inc. fell more than 2.1 percent after Bank of America Corp. cut their ratings. Marvell Technology Group Ltd. tumbled 11 percent as the maker of processors for the BlackBerry phone forecast sales that missed estimates.

The Standard & Poor’s 500 Index slumped 0.7 percent to 1,321.15 at 4 p.m. in New York after climbing 1.7 percent yesterday. The gauge added 0.1 percent this week. The Dow Jones Industrial Average decreased 88.32 points, or 0.7 percent, to 12,169.88. Crude oil rose to $104.94 a barrel in New York as Libyan rebels repelled government attempts to retake oil hubs.

“It’s all about oil,” said Quincy Krosby, chief market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees $750 billion. “Investors are really concerned about more geopolitical disruption over the weekend. If oil continues above $100 barrel, it will certainly have a negative impact on businesses and consumer spending.”

Economic Surprise Index

The S&P 500 had climbed 0.8 percent this week through yesterday, pushed up by reports showing claims for first-time jobless benefits decreased, U.S. businesses grew at the fastest pace in two decades and gauges of manufacturing and service industries climbed to the highest levels since at least 2005. Better-than-estimated data pushed the Citigroup Economic Surprise Index to its highest level ever, according to data compiled by Bloomberg.

Crude rose 2.5 percent today amid concern unrest in Libya will spread to other oil producers in the region, curbing exports, and as a falling U.S. jobless rate signaled that fuel demand will climb. Libyan leader Muammar Qaddafi sent troops to recapture towns in the western part of the country and prepared to quash protests in the capital, Tripoli.

“We’ve had a V-shaped recovery, but it’s a slower move coming off the bottom,” said Liz Ann Sonders, the New York- based chief investment strategist at Charles Schwab Corp., which has $1.6 trillion in client assets. “We’ve gotten to sentiment extremes and that increases the market vulnerability and that’s exactly what we saw with the unrest in the Middle East. There’s no question the rise in commodity prices hits consumption.”

Oil will gain, extending a rally that sent prices to a 29- month high, said Mark Mobius, executive chairman of Templeton Asset Management’s Emerging Markets Group.

‘Trend is Up’

“The trend is up,” Mobius said in an interview today with Lisa Murphy on Bloomberg Television’s ‘‘Fast Forward.’’ ‘‘I’m not predicting any particular level. Of course, there will be lots of volatility. But if you look at the long-term trend it’s definitely up” for oil, he said.

Average hourly earnings were unchanged in February, Labor Department data showed. Economists in a Bloomberg survey had forecast 0.2 percent growth. The data offset a 192,000 increase in payrolls and an unexpected decline in the unemployment rate to 8.9 percent, the lowest level since April 2009.

“The numbers point both to a much-needed improvement in the jobs picture and to remaining challenges,” said Mohamed El- Erian, chief executive officer at Newport Beach, California- based Pacific Investment Management Co. He cited “declining labor participation” as a lingering hurdle. The labor participation rate held at 64.2 percent, compared with January, and is down from 64.8 percent in February 2010.

‘More Normal Level’

The labor market has improved slowly and it may take several years for the unemployment rate to reach a “more normal level,” Federal Reserve Chairman Ben S. Bernanke said March 1 during testimony before the Senate Banking Committee.

Private payrolls have increased for 12 straight months after plunging by as many as 841,000 jobs when President Barack Obama took office at the depths of the recession in January 2009, Labor Department data show.

The recovery in the job market has helped propel a rebound in the U.S. equity market after the collapse of the subprime mortgage market triggered the worst bear market since the Great Depression. The S&P 500 rallied 97 from a 12-year low in March 2009 through yesterday, the biggest advance over the same period of time since the 1930s, according to data compiled by Howard Silverblatt, senior index analyst at S&P.

Industrial Companies Slump

Shares of industrial companies in the S&P 500 slumped 1.2 percent as a group. Caterpillar, the world’s largest maker of construction equipment, dropped 1.2 percent to $103.04. GE slid 1.8 percent to $20.37. The Morgan Stanley Cyclical Index fell 1.1 percent as 26 of its 30 stocks retreated. The Bloomberg U.S. Airlines Index fell 1.9 percent.

Financial stocks had the biggest decline in the S&P 500 among 10 industries, dropping 1.3 percent. The KBW Bank Index slumped 1.5 percent as 22 of its 24 stocks retreated.

Citigroup dropped 3 percent to $4.54. The third-largest U.S. bank was cut to “neutral” from “buy” by Bank of America, which also cut Goldman Sachs Group to “neutral” from “buy.” Goldman Sachs shares fell 2.1 percent to $161.

Marvell Technology fell 11 percent to $16.13. The maker of the processor that runs BlackBerry smartphones announced fourth- quarter earnings and revenue that missed estimates.

Monster Worldwide Inc. slipped 6.4 percent, the most in the S&P 500, to $15.90. The online-recruiting company was cut to “market perform” from “outperform” at William Blair & Co.

Highest Since June

The S&P 500 has risen 5.1 percent this year as government stimulus measures, higher-than-estimated earnings and takeovers bolstered investor confidence. The rally left the benchmark gauge for American equities trading at 15.5 times its operating earnings, near the highest valuation since June, according to data compiled by Bloomberg.

Stocks fell today even after a report showed that orders at U.S. factories climbed in January by the most in more than four years as demand for commercial aircraft rebounded after slumping the previous month. Bookings for manufacturers’ goods increased 3.1 percent, the most since September 2006, after a revised 1.4 percent gain in December that was larger than previously estimated, the Commerce Department said.

Agilent Technologies Inc. rose 9.2 percent, the most in the S&P 500, to $46.75. The world’s biggest maker of scientific- testing equipment increased its long-term sales and operating margin forecasts at a meeting with analysts yesterday, JPMorgan Chase & Co. said in a note to clients. JDS Uniphase Corp., which bought Agilent’s network solutions test unit last year, climbed 8.9 percent to $27.37.

Cadence Pharmaceuticals Inc. soared 15 percent to $8.62. The biopharmaceutical company reported a loss of 33 cents a share in the fourth quarter, 1 cent less than the average analyst estimate in a Bloomberg survey.

–With assistance from Timothy Homan in Washington. Editors: Nick Baker, Michael Regan