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Recovery Hopes Gone In World's Longest 'Recession'

Sun Blames Brussels As 3,000 Jobs Axed

NY Delays $959M Pension Fund Payment

U.S. Stocks, Oil Retreat, While Tech Shares Gain on Microsoft

By Elizabeth Stanton

Oct. 23 (Bloomberg) -- U.S. stocks fell, wiping out a weekly gain for the Standard & Poor’s 500 Index, 

as a drop in oil weighed on energy producers and disappointing results at the nation’s largest railroad dragged down industrial shares.
Exxon Mobil Corp. and Schlumberger Ltd. led energy producers lower as crude slid for a second day. Industrial shares in the S&P 500 lost 1.8 percent as a group, led by railroad stocks, after Burlington Northern Santa Fe Corp. forecast profit below analyst estimates. Technology shares posted the smallest 

drop among 10 groups as Microsoft Corp. and Amazon.com Inc. surged on better-than-estimated earnings.
The S&P 500 dropped 1.1 percent to 1,081.26 at 2:25 p.m. in New York, its steepest loss on a closing 

basis since the first day of the month. The main benchmark for American equities is down 0.6 percent this week after closing at a one-year high on Oct. 19. The Dow Jones Industrial Average tumbled 101.5 points, or 1 percent, to 9,979.81. The Nasdaq Composite slipped 0.3 percent to 2,158.56 after earlier climbing 1.2 percent.
“I’m watching truckers and railroads for signs the economy is improving, and we didn’t get that,” said 

John Massey, a money manager at SunAmerica Asset Management Corp. in Jersey City, New Jersey. “There’s not a lot of confidence in volumes improving next year.”
The S&P 500 is trading near its highest valuation relative to reported operating earnings in more than 

five years after climbing as much as 62 percent since March 9 as the U.S. lent, spent or guaranteed $11.6 trillion to combat the worst recession since the 1930s. Worldwide, governments from Beijing to Berlin 

spent $12 trillion to help end the global contraction, according to data from the Washington-based International Monetary Fund.
Earnings Season
All but 20 of the 138 companies in the S&P 500 that reported third-quarter results this week beat the average analyst estimate, including Apple Inc., Caterpillar Inc. and Morgan Stanley, according to data compiled by Bloomberg. Still, per-share profits were down 19 percent from the year-earlier period for 

the group, adding to a record eight straight quarters of earnings declines. Analysts expect profits to rise 

in the fourth quarter.
Since the start of the third-quarter reporting period, 80 percent of the companies in the S&P 500 have released better- than-expected results, according to Bloomberg data. There’s not a higher proportion in 

data going back to 1993.
“You have this skepticism in the equity market that is frankly irrational,” saidRichard Campagna, 

chief executive officer of 300 North Capital LLC in Pasadena, California, which manages $600 million. “Given that the third quarter was the tail end of the recession and earnings are this good tells you earnings are going to snap back much faster than people expect.”
Oil Slumps
Exxon, the largest oil producer, slumped 1.3 percent to $73.50. Schlumberger, the biggest 

oilfield-services company, sank 4.6 percent to $65.45.
Crude for December delivery fell 86 cents, or 1.1 percent, to $80.33 a barrel in New York Mercantile Exchange trading. Futures are up 80 percent this year and touched a one-year high of $82 a barrel on 

Oct. 21.
Burlington Northern Santa lost 6.6 percent to $79.03, leading transportation companies in the S&P 500 

to a 3.7 percent decline. The largest U.S. railroad forecast fourth-quarter profit of $1.20 a share at most, trailing the average analyst estimate of $1.36 in a Bloomberg survey.
Union Pacific Corp., the second-largest U.S. railroad by revenue, yesterday said it won’t have more than “slightly” increased freight volume next year. Its shares slumped 5.9 percent to $57.52.
Microsoft, Amazon.com Rally
Microsoft climbed 5.8 percent to $28.13, a 14-month high on a closing basis. The world’s largest 

software maker posted a smaller drop in profit than analysts estimated after slashing costs to make up 

for falling sales.
Amazon.com soared 26 percent to a record $117.78 for the biggest gain in the S&P 500. Third-quarter 

net income increased 69 percent after discounts and the Kindle electronic book reader fueled sales.
“In what is still a relatively difficult but clearly improving economic environment, you’re seeing very impressive corporate management,” said Rod Smyth, chief investment strategist at Riverfront Investment Group in Richmond, Virginia. “If you look at all three times when the market’s had the nicest advances 

this year, they’ve all come during earnings season. I think that’s very encouraging.”
CA Inc. dropped the most in the S&P 500, sliding 11 percent to $21.38. The second-largest maker of software for mainframe computers said bookings tumbled 37 percent from a year earlier in the fiscal 

second quarter.
MEMC Electronic Materials Inc. declined 9.2 percent to $14.02. The maker of silicon wafers for solar modules and semiconductors posted a greater-than-estimated third-quarter loss on costs to close two 

plants in Texas and Missouri and repair equipment at another.
Broadcom Corp. lost 7 percent to $28.59. The maker of semiconductors for wireless headsets and 

television set-top boxes said sales will be little changed in the fourth quarter from the previous period.
To contact the reporter on this story: Elizabeth Stanton in New York atestanton@bloomberg.net
Last Updated: October 23, 2009 14:28 EDT