By Eric Martin Nov. 17 (Bloomberg) -- U.S. stocks fell, extending a two- week drop, as a record contraction in New York manufacturing and Citigroup Inc.'s plan to cut 50,000 jobs spurred concern the recession will deepen. Alcoa Inc., the nation's largest aluminum producer, lost 8.4 percent after UBS AG cut its recommendation on the shares and the Federal Reserve Bank of New York's general economic index slid to the lowest level since records began in 2001. Citigroup Inc., the fourth-biggest U.S. bank by market value, slipped 5 percent and is down 69 percent in 2008. The Standard & Poor's 500 Index declined 2.1 percent to 854.73 at 10:36 a.m. in New York. The Dow Jones Industrial Average decreased 188.37, or 2.2 percent, to 8,308.94 and the Nasdaq Composite Index fell 1.7 percent to 1,490.61. Three stocks fell for each that rose on the New York Stock Exchange. ``You're going to continue to get barraged with bad economic data,'' Bill Stone, who oversees $56 billion as chief investment strategist at PNC Wealth Management in Philadelphia, told Bloomberg Television. ``Earnings have hit a wall or fallen off a cliff in a lot of cases. You're not likely to see much help from this front for a while.'' The retreat in U.S. equities today followed declines in Asia and Europe after Japan unexpectedly slid into a recession and Britain's biggest business lobby said the U.K. slump may be deeper than earlier predicted. The S&P 500 is down about 42 percent this year as credit- related losses and writedowns at financial firms worldwide topped $966 billion, threatening global economic growth. The benchmark index for U.S. equities is on course for the steepest annual decline since 1931. Profit Slump Profits slumped 17 percent on average at companies in the S&P 500 that have reported third-quarter results, according to Bloomberg data. Analysts expect an 8.5 percent drop in full-year earnings, based on estimates compiled by Bloomberg. Alcoa slid 90 cents to $9.94. The aluminum producer was lowered to ``neutral'' from ``buy'' at UBS AG on ``uncertainty'' in the aluminum market. Caterpillar Inc., the biggest maker of bulldozers, lost $1.06 to $35.90, while Deere & Co., the biggest maker of tractors, retreated 2 percent to $33.13. Manufacturing in New York contracted in November as orders and sales plunged, the New York Fed's index showed. The measure fell to minus 25.4, the lowest since records began in 2001, from minus 24.6 percent in October, the bank said. Readings below zero for the Empire State index signal manufacturing activity is shrinking. Citigroup Cuts Citigroup Inc. fell 48 cents to $9.05. The bank plans to cut about 14 percent of its workforce as of Sept. 30, and reduce expenses by 20 percent from their peak as the global economy contracts. Chief Executive Officer Vikram Pandit is scheduled to announce the plan to employees today. The reductions were disclosed in a presentation posted on New York-based Citigroup's Web site. Dell Inc., the second-largest U.S. computer maker, slid after the shares were downgraded to ``neutral'' from ``buy'' at Merrill Lynch, which said PC sales will decline next year as companies cut spending amid a slumping economy. The stock slipped 13 cents to $10.76. Agilent Technologies Inc. dropped 8.4 percent, the most in the S&P 500, to $19. The biggest maker of scientific-testing equipment reported sales that missed analysts' estimates. General Motors Corp., seeking a federal bailout as its cash dwindles, climbed 7 percent, the most in the Dow average, to $3.22. The automaker will raise 22.4 billion yen ($230 million) by selling its 3 percent stake in Suzuki Motor Corp. The Japanese company said it will use cash to buy back its shares. Target Gains Target Corp. gained $1.02, or 3.1 percent, to $34.05. The second-largest U.S. discount chain reported third-quarter profit that beat the average estimate of 20 analysts by 1 cent. Genworth Financial Inc. surged 18 percent, the most in the S&P 500, to $1.73. The insurer spun off by General Electric Co. said it's in negotiations to acquire InterBank Fsb and with it eligibility for the U.S. Treasury's $750 billion bailout program. Yum! Brands Inc., owner of the Pizza Hut, Taco Bell and KFC chains, gained after UBS upgraded the shares to ``buy'' from ``neutral,'' citing a recent share-price drop and potential for ``meaningful'' earnings-per-share growth. Yum! gained 43 cents to $25.41. Banks `Fairly Valued' The KBW Bank Index's retreat to a 12-year low may signal investors in U.S. financial stocks are ``ignoring'' an improvement in credit markets since October that's unlikely to reverse, according to Morgan Stanley. The financial sector is ``fairly valued to moderately cheap,'' Abhijit Chakrabortti, Morgan Stanley's New York-based head of global equity strategy, wrote in a research note dated yesterday. He recommended shares of Wells Fargo & Co., JPMorgan Chase & Co., PNC Financial Services Group Inc., Bank of New York Mellon Corp. and State Street Corp. Dubai Group, an investment company managing more than $40 billion on behalf of Dubai's ruler, plans to buy stakes in U.S. real-estate and asset management companies to profit from low prices. The group, which has already spent as much as $3.5 billion in the U.S., is focusing on the world's biggest economy because it has the potential to recover quicker from the global financial crisis than Europe, Chairman Soud Ba'alawy said in an interview at a conference in Dubai. An almost 12 percent decline in the S&P 500 so far this month left the index valued at less than 18.4 times earnings, near the lowest since September 2007. U.S. stocks tumbled on Nov. 14, capping a second straight weekly loss, as a record decrease in retail sales and weaker demand for mobile phones raised concern about the depth of the recession. To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

Source