Sept. 25 (Bloomberg) -- Microsoft Corp., the world's largest software maker, and Japan's Kenwood Corp. signed a cross- licensing agreement to develop technology for car-navigation systems and consumer electronics.
Both companies will share software and technology to be used in the products, Redmond, Washington-based Microsoft said in a statement distributed by PRNewswire yesterday. Kenwood will make a cash payment to Microsoft for use of its patents, the statement said, without providing figures.
The agreement follows a plan by Japan's Sharp Corp. and Pioneer Corp. to jointly develop car-navigation equipment and DVD players. Tokyo-based Kenwood will create a venture next month with Victor Co. of Japan Ltd., a unit of Matsushita Electric Industrial Co., to develop car electronics and home-audio systems to cut expenses and bolster profitability.
Kenwood's car electronics division, the company's biggest by revenue, posted an operating loss of 2 billion yen ($17 million) last fiscal year. Sales at the division dropped 12 percent to 94.9 billion yen in the year ended March 31 on price declines and costs to develop new products.
Sharp, Japan's largest maker of liquid-crystal display televisions, last week said it will buy new shares equivalent to a 14 percent stake in Pioneer for 41.4 billion yen. The stake purchase, to be made in December, will make Sharp the biggest shareholder in Pioneer and help the Osaka-based TV maker enter the car-navigation market.
Kenwood shares rose 0.7 percent to 153 yen at the 11 a.m. break on the Tokyo Stock Exchange, while the benchmark Nikkei 225 Stock Average fell 0.1 percent. Microsoft shares gained 1.5 percent to $29.08 in Nasdaq Stock Market trading yesterday.
Showing posts with label Microsoft. Show all posts
Showing posts with label Microsoft. Show all posts
Tuesday, September 25, 2007
Microsoft Looks to `Halo 3' to Hold Xbox Console Lead
Sept. 25 (Bloomberg) -- Microsoft Corp. took the lead in video-game players after it introduced the Xbox 360 in November 2005, five years after entering the business. Now the world's largest software maker is banking on another new product to stay No. 1.
With Nintendo Co.'s Wii threatening to topple the Xbox by year-end, Microsoft is looking to ``Halo 3,'' the latest version of the best-selling Xbox series, to rekindle interest in its console. ``Halo 3,'' an alien-blasting game aimed at teens and young adults, goes on sale today.
``It's going to be close,'' Microsoft Chief Financial Officer Chris Liddell said in an interview.
Redmond, Washington-based Microsoft grabbed the lead in the latest generation of game consoles by selling its Xbox 360 a year before rival machines. A year later, Nintendo introduced the Wii, which surprised executives and analysts with its family appeal.
Wii has outsold the Xbox in the U.S. in each of the 10 months it has been on the market, according to Port Washington, New York-based researcher NPD Group Inc. Through June 30, Microsoft said it sold more than 11.6 million Xbox 360s, short of its initial forecast of 15 million. Nintendo said it sold 9.3 million of its Wii players.
Microsoft says it has big hopes for ``Halo 3,'' which sells for $59 to $129. The game may surpass the $170 million in one- day U.S. sales of the final installment of the Harry Potter books to make ``Halo 3'' the biggest entertainment event this year, said Jeff Bell, vice president for Xbox marketing.
New Players
```Halo 3' is going to bring a lot of people out of the woodwork,'' said Michael Pachter, a Wedbush Morgan Securities analyst in Los Angeles.
At stake is more than bragging rights. Microsoft has pledged to turn a profit in the Xbox division in the year that began in July, following $7 billion in losses since the first Xbox was sold in 2001. The Xbox division accounted for 12 percent of Microsoft's $51.1 billion in sales last year.
For the business to make money, Microsoft has to sell enough profitable software to make up for the machines, which often lose money or break even. Popular software can in turn boost sales of the consoles.
More than 10,000 stores stayed open until midnight to sell ``Halo 3,'' 54 percent more than for the second installment, which brought in $125 million on its first day, Microsoft said.
Game Disks
The release was marred by reports on blogs and gamer discussion groups such as GameTrailers.com that the limited edition packaging is scratching game discs. Microsoft responded by posting a notice on the Xbox Web site offering replacements.
As many as 6 million copies may be sold in the holiday season, compared with 6.5 million total for ``Halo 2'' since its November 2004 debut, Pachter said. At least 480,000 people have already played ``Halo 3'' online, according to the Web site of Bungie, the Microsoft studio that makes the game.
``Halo 3'' may persuade 5 million people to buy an Xbox, for a total of as many as 16.6 million, he said. That still won't be enough to keep Xbox 360 in first place, he said. He estimates that Nintendo will sell 19 million Wii's by year-end.
Ken Toyoda, a spokesman at Kyoto, Japan-based Nintendo, declined to comment.
Special Edition
Microsoft is offering a special edition machine in the green and gold colors of Master Chief, the humankind-defending soldier in ``Halo 3.'' At $400, it costs more than two Xbox models and less than the top-of-the-line version.
Microsoft shares have dropped 1 percent this year, compared with a 7 percent gain by the Standard & Poor's 500 Index. Microsoft rose 48 cents to $29.56 at 4 p.m. New York time in Nasdaq Stock Market trading.
Microsoft's first Xbox was thrashed by Sony Corp., whose PlayStation 2 outsold the Xbox 5-to-1. Peter Moore, an Xbox vice president at the time of the release of the second iteration, the 360, pledged a ``whole different ballgame.''
This generation has been different, but not in the way Moore envisioned. Nintendo, whose sales in the last series of game machines trailed Microsoft and Sony, is dominating.
The Wii's controller, which can be swung like a bat or a racket, gets kids more involved in the game and has been a hit with older players. Sony's PlayStation 3 was hurt by a higher price and a lack of appealing games.
Profit Margins
Microsoft is balancing its desire to keep the lead with its goal to turn a profit. ``Halo 2'' gave Microsoft Chief Executive Officer Steve Ballmer's entertainment unit its only profitable quarter. Games made in-house like ``Halo 3'' can have profit margins of as high as 70 percent, said Billy Pidgeon, an analyst at Framingham, Massachusetts-based researcher IDC.
``If they had chosen to lose $10 billion, they might be in first but that would be stupid,'' Pachter said. Ballmer ``is a disciplined guy and his troops are listening to his command: `Thou shalt be profitable.'''
Moore said last year Microsoft planned to sell 90 million Xbox 360s before this generation ends, up from 25 million with the first Xbox. To get there, Microsoft has to attract kids, women and older gamers.
Microsoft hasn't done that, Pachter said. ``Halo 3'' is targeted mostly at young males attracted by weapons such as a shoulder-fired laser cannon and a feature that lets them share their most impressive victories online.
The cheapest Xbox costs $280, too much to lure some customers even after an August price cut from $300. The Wii costs $250, with a game included. Most games cost $60.
More price cuts would jeopardize profit, so Microsoft may sacrifice the lead, Pachter said.
With Nintendo Co.'s Wii threatening to topple the Xbox by year-end, Microsoft is looking to ``Halo 3,'' the latest version of the best-selling Xbox series, to rekindle interest in its console. ``Halo 3,'' an alien-blasting game aimed at teens and young adults, goes on sale today.
``It's going to be close,'' Microsoft Chief Financial Officer Chris Liddell said in an interview.
Redmond, Washington-based Microsoft grabbed the lead in the latest generation of game consoles by selling its Xbox 360 a year before rival machines. A year later, Nintendo introduced the Wii, which surprised executives and analysts with its family appeal.
Wii has outsold the Xbox in the U.S. in each of the 10 months it has been on the market, according to Port Washington, New York-based researcher NPD Group Inc. Through June 30, Microsoft said it sold more than 11.6 million Xbox 360s, short of its initial forecast of 15 million. Nintendo said it sold 9.3 million of its Wii players.
Microsoft says it has big hopes for ``Halo 3,'' which sells for $59 to $129. The game may surpass the $170 million in one- day U.S. sales of the final installment of the Harry Potter books to make ``Halo 3'' the biggest entertainment event this year, said Jeff Bell, vice president for Xbox marketing.
New Players
```Halo 3' is going to bring a lot of people out of the woodwork,'' said Michael Pachter, a Wedbush Morgan Securities analyst in Los Angeles.
At stake is more than bragging rights. Microsoft has pledged to turn a profit in the Xbox division in the year that began in July, following $7 billion in losses since the first Xbox was sold in 2001. The Xbox division accounted for 12 percent of Microsoft's $51.1 billion in sales last year.
For the business to make money, Microsoft has to sell enough profitable software to make up for the machines, which often lose money or break even. Popular software can in turn boost sales of the consoles.
More than 10,000 stores stayed open until midnight to sell ``Halo 3,'' 54 percent more than for the second installment, which brought in $125 million on its first day, Microsoft said.
Game Disks
The release was marred by reports on blogs and gamer discussion groups such as GameTrailers.com that the limited edition packaging is scratching game discs. Microsoft responded by posting a notice on the Xbox Web site offering replacements.
As many as 6 million copies may be sold in the holiday season, compared with 6.5 million total for ``Halo 2'' since its November 2004 debut, Pachter said. At least 480,000 people have already played ``Halo 3'' online, according to the Web site of Bungie, the Microsoft studio that makes the game.
``Halo 3'' may persuade 5 million people to buy an Xbox, for a total of as many as 16.6 million, he said. That still won't be enough to keep Xbox 360 in first place, he said. He estimates that Nintendo will sell 19 million Wii's by year-end.
Ken Toyoda, a spokesman at Kyoto, Japan-based Nintendo, declined to comment.
Special Edition
Microsoft is offering a special edition machine in the green and gold colors of Master Chief, the humankind-defending soldier in ``Halo 3.'' At $400, it costs more than two Xbox models and less than the top-of-the-line version.
Microsoft shares have dropped 1 percent this year, compared with a 7 percent gain by the Standard & Poor's 500 Index. Microsoft rose 48 cents to $29.56 at 4 p.m. New York time in Nasdaq Stock Market trading.
Microsoft's first Xbox was thrashed by Sony Corp., whose PlayStation 2 outsold the Xbox 5-to-1. Peter Moore, an Xbox vice president at the time of the release of the second iteration, the 360, pledged a ``whole different ballgame.''
This generation has been different, but not in the way Moore envisioned. Nintendo, whose sales in the last series of game machines trailed Microsoft and Sony, is dominating.
The Wii's controller, which can be swung like a bat or a racket, gets kids more involved in the game and has been a hit with older players. Sony's PlayStation 3 was hurt by a higher price and a lack of appealing games.
Profit Margins
Microsoft is balancing its desire to keep the lead with its goal to turn a profit. ``Halo 2'' gave Microsoft Chief Executive Officer Steve Ballmer's entertainment unit its only profitable quarter. Games made in-house like ``Halo 3'' can have profit margins of as high as 70 percent, said Billy Pidgeon, an analyst at Framingham, Massachusetts-based researcher IDC.
``If they had chosen to lose $10 billion, they might be in first but that would be stupid,'' Pachter said. Ballmer ``is a disciplined guy and his troops are listening to his command: `Thou shalt be profitable.'''
Moore said last year Microsoft planned to sell 90 million Xbox 360s before this generation ends, up from 25 million with the first Xbox. To get there, Microsoft has to attract kids, women and older gamers.
Microsoft hasn't done that, Pachter said. ``Halo 3'' is targeted mostly at young males attracted by weapons such as a shoulder-fired laser cannon and a feature that lets them share their most impressive victories online.
The cheapest Xbox costs $280, too much to lure some customers even after an August price cut from $300. The Wii costs $250, with a game included. Most games cost $60.
More price cuts would jeopardize profit, so Microsoft may sacrifice the lead, Pachter said.
Monday, September 17, 2007
Microsoft faces fresh antitrust probes
Microsoft faces the threat of fresh antitrust probes and escalating financial penalties after a top European Union court upheld Brussels' landmark 2004 competition ruling that found the world's biggest software group guilty of abusing its dominant market position.
The judgment by the European Court of First Instance handed a historic victory to the European Commission in its nine-year legal battle with Microsoft, and gives the regulator crucial backing to expand its investigation.
The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.
In the longer term, the court's decision to uphold the Commission's tough line against dominant companies may also pave the way for closer scrutiny of other technology giants such as Google, Apple and IBM.
Neelie Kroes, the EU competition commissioner, said: "The court has confirmed that Microsoft cannot regulate the market by imposing its products and services on people. The court has confirmed that Microsoft can no longer prevent the market from functioning properly and that computer users are therefore entitled to benefit from choice, more innovative products and more competitive prices."
She also warned Microsoft to comply swiftly with the Commission's original decision. Suggesting that new fines for the group's failure to implement the ruling may be imminent, Ms Kroes said: "I will not tolerate continued non-compliance."
Microsoft conceded defeat, describing the ruling as "disappointing". Brad Smith, general counsel, said: "It is clearly very important to us that we comply with our obligations under European law. We will study this decision carefully, and if there are additional steps that we need to take, we will take them."
David Reichert, a Republican member of Congress from Washington, Microsoft's home state, said: "This ruling sets a dangerous precedent that says Europe is closed for business to those companies who invest the capital and resources necessary to lead a market."
Thomas Barnett, head of the antitrust division at the US justice department, said the Bush administration was "concerned" that the standard applied by the court might harm consumers by "chilling innovation and discouraging competition". Mr Barnett said: "In the United States, the antitrust laws are enforced to protect consumers by protecting competition, not competitors."
At the heart of the Commission's 2004 ruling was the finding that Microsoft had abused its dominant position in the market for desktop operating systems by freezing out rivals in adjacent markets such as media player and server software. The group was ordered to produce a version of Windows without Microsoft's own media player, and to make available technical information that would allow rivals to develop server software that functioned smoothly with Windows-driven computers. Brussels also imposed a record $690m fine.
The judgment upheld all the Commission's arguments relating to the main pillars of the 2004 ruling. But it did annul the part of the ruling that deals with the powers of the monitoring trustee – the independent expert responsible for reviewing Microsoft's compliance with the decision.
"At long last, the decision opens the prospect for dynamic competition in the software industry," said Thomas Vinje, the lawyer representing Ecis, a group including IBM, Nokia, Oracle and Sun Microsystems.
The judgment by the European Court of First Instance handed a historic victory to the European Commission in its nine-year legal battle with Microsoft, and gives the regulator crucial backing to expand its investigation.
The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.
In the longer term, the court's decision to uphold the Commission's tough line against dominant companies may also pave the way for closer scrutiny of other technology giants such as Google, Apple and IBM.
Neelie Kroes, the EU competition commissioner, said: "The court has confirmed that Microsoft cannot regulate the market by imposing its products and services on people. The court has confirmed that Microsoft can no longer prevent the market from functioning properly and that computer users are therefore entitled to benefit from choice, more innovative products and more competitive prices."
She also warned Microsoft to comply swiftly with the Commission's original decision. Suggesting that new fines for the group's failure to implement the ruling may be imminent, Ms Kroes said: "I will not tolerate continued non-compliance."
Microsoft conceded defeat, describing the ruling as "disappointing". Brad Smith, general counsel, said: "It is clearly very important to us that we comply with our obligations under European law. We will study this decision carefully, and if there are additional steps that we need to take, we will take them."
David Reichert, a Republican member of Congress from Washington, Microsoft's home state, said: "This ruling sets a dangerous precedent that says Europe is closed for business to those companies who invest the capital and resources necessary to lead a market."
Thomas Barnett, head of the antitrust division at the US justice department, said the Bush administration was "concerned" that the standard applied by the court might harm consumers by "chilling innovation and discouraging competition". Mr Barnett said: "In the United States, the antitrust laws are enforced to protect consumers by protecting competition, not competitors."
At the heart of the Commission's 2004 ruling was the finding that Microsoft had abused its dominant position in the market for desktop operating systems by freezing out rivals in adjacent markets such as media player and server software. The group was ordered to produce a version of Windows without Microsoft's own media player, and to make available technical information that would allow rivals to develop server software that functioned smoothly with Windows-driven computers. Brussels also imposed a record $690m fine.
The judgment upheld all the Commission's arguments relating to the main pillars of the 2004 ruling. But it did annul the part of the ruling that deals with the powers of the monitoring trustee – the independent expert responsible for reviewing Microsoft's compliance with the decision.
"At long last, the decision opens the prospect for dynamic competition in the software industry," said Thomas Vinje, the lawyer representing Ecis, a group including IBM, Nokia, Oracle and Sun Microsystems.
U.S. Stocks Drop on Credit Concern; Banks, Microsoft Retreat
Sept. 17 (Bloomberg) -- U.S. stocks fell as withdrawals from British bank Northern Rock Plc reignited concern over the cost of credit and sent the Standard & Poor's 500 Index down for the first time in five days.
Citigroup Inc., Bank of America Corp. and Merrill Lynch & Co. led declines among financial companies as traders also pared bets the Federal Reserve will lower its benchmark rate by half a percentage point tomorrow. Marsh & McLennan Cos., the biggest insurance broker, dropped the most in three years after replacing the head of its flagship unit. Microsoft Corp. retreated after losing a European antitrust appeal.
The S&P 500 slipped 7.6, or 0.5 percent, to 1,476.65. The Dow Jones Industrial Average decreased 39.1, or 0.3 percent, to 13,403.42. The Nasdaq Composite Index dropped 20.52, or 0.8 percent, to 2,581.66. About 1.1 billion shares changed hands on the New York Stock Exchange, the second fewest for a full session this year.
The interest rate banks charge each other for overnight loans in pounds increased the most since June as Northern Rock customers withdrew savings after the bank was forced to seek emergency funding. Financial companies in the S&P 500 have lost 9.4 percent this year, the most among 10 industries, on concern credit-market losses will reduce earnings.
``We're seeing photos on the news of people lining up outside of banks,'' said Michael Barron, who manages about $1 billion as chief executive officer of Knott Capital Management in Exton, Pennsylvania. ``It seems to really illustrate the stress facing the overall economy and credit markets. This has investors nervous.''
Northern Rock
Northern Rock, the U.K. mortgage lender bailed out by the Bank of England last week, tumbled to a seven-year low in London as hundreds of clients ignored assurances from Chief Executive Officer Adam Applegarth and U.K. Chancellor of the Exchequer Alistair Darling that their deposits are secure. Customers removed at least 2 billion pounds ($4 billion), or about 8 percent of Northern Rock's total, since Sept. 14, according to an estimate by JPMorgan Chase & Co.
The lender needed emergency funding last week because it relies on the capital markets rather than deposits for 73 percent of its funds.
The overnight rate banks charge to lend British pounds soared 60 basis points to 6.47 percent today, according to the British Bankers' Association. The overnight rate for dollars rose 17 basis points to 5.30 percent.
Fed funds futures contracts show a 50 percent chance that the Fed will lower its benchmark rate from 5.25 percent to 4.75 percent tomorrow, down from 58 percent odds on Sept. 14. Traders are certain of a cut of at least a quarter point.
'Psychology of Fear'
An unfounded concern that the U.S. economy will slip into a recession has pushed some stocks down too far, investor Laszlo Birinyi said.
``All the bad news is being magnified,'' said Birinyi, who helps manage about $600 million as president of Birinyi Associates Inc. in Westport, Connecticut. ``Good, solid companies which have nothing to do with finance, which are really immune from all these other issues, are being punished just as severely as stocks which are really tied to the issues.''
``Right now, we have that psychology of fear,'' said Birinyi.
Financial Shares Drop
Marsh & McLennan dropped $1.58, or 6 percent, to $24.60, an almost four-year low. Brian Storms stepped down as the company said it needed someone with different skills to serve as chief executive officer of its Marsh Inc. brokerage unit. Morgan Stanley analysts lowered the stock to ``underweight'' from ``equal weight,'' saying the ``uncertainty'' could weigh on customer relationships.
Financial shares were the biggest drag on the S&P 500, dropping 0.8 percent as a group.
Credit Suisse Group American depositary receipts decreased 61 cents to $63.80. The second-biggest Swiss bank and other lenders agreed to lower the amount of loans they'll initially sell for the buyout of First Data Corp. to $5 billion and cut the price to 96 cents on the dollar, according to three people with knowledge of the talks.
David Lilly, a spokesman for Kohlberg Kravis Roberts & Co., the company acquiring First Data, declined to comment, as did Bruce Corwin, a Credit Suisse spokesman in New York.
The decision to sell debt at a discount follows similar moves by lenders including Citigroup and JPMorgan in the takeovers of Alliance Boots Plc and Allison Transmission Inc.
Microsoft fell 32 cents to $28.73. The company lost its appeal of a European Union antitrust decision after three years of legal wrangling, forcing it to pay a record 497 million-euro ($689 million) fine and help rivals connect their products to the Windows operating system.
Goldman, RadioShack
Goldman Sachs Group Inc., the second-largest U.S. manager of hedge funds, retreated $2.98 to $187.61 after its Equity Opportunities hedge fund lost 1.8 percent in the first week of September, extending the slide that led to last month's $3 billion cash injection.
RadioShack Corp. declined $1.56, or 6.6 percent, to $22.10 for the biggest drop in the S&P 500. Credit Suisse said the third-largest U.S. electronics chain's investment in the video- game business may reduce earnings.
Merrill, PHH
Merrill Lynch slumped $1.80 to $72.85. The securities firm has reduced staffing at mortgage lender First Franklin Financial Corp. ``to be in line with current business requirements,'' spokesman Bill Halldin said in a telephone interview. He declined to say how many people would be fired.
PHH Corp. tumbled $4.26, or 15 percent, to $24.24. The mortgage lender and vehicle-fleet manager, which agreed to be bought by General Electric Co. and Blackstone Group LP, said the sale may unravel after Blackstone failed to get $750 million in loans.
About 10 stocks declined for every three that rose on the NYSE.
Monsanto Co. added $1.94 to $75.44. The world's biggest seed producer said earnings in the year ended Aug. 31 rose more than expected because of Latin American corn-seed sales, tax benefits and higher prices for weed killer.
Out of 10 S&P industry groups, only energy producers gained as oil advanced to a record for a fourth day, reaching $80.70 a barrel in New York on signs the Fed will lower interest rates tomorrow. Exxon Mobil Corp., the world's biggest oil company, rose 59 cents to $89.26. Chevron Corp., the second-largest U.S. oil company, gained 28 cents to $90.93.
Newell Rubbermaid, Ford
Newell Rubbermaid Inc. added $2.26, or 8.8 percent, to $28.02 for the steepest gain in the S&P 500. The maker of Graco baby buggies and Rolodex organizers raised its full-year earnings and third-quarter sales forecasts on strength in its home and family and tools and hardware units, as well as benefits from foreign currency rates.
Ford Motor Co., the second-biggest U.S. automaker, gained 25 cents to $8.28. Bear Stearns & Co. lifted its recommendation on the stock to ``outperform'' from ``peer perform,'' saying the company may benefit from a renegotiated labor contract between General Motors Corp. and the United Auto Workers.
Investors also awaited earnings reports from brokerage firms this week. Bear Stearns Cos., Morgan Stanley and Lehman Brothers Holdings Inc. will probably report profit declines, according to the average analyst estimates from Bloomberg surveys, while Goldman Sachs may post a gain from selling a company.
``We expect a calm and steady week on the brokerage announcements,'' said David Darst, who manages $728 billion as chief investment strategist at Morgan Stanley Global Wealth Management in New York. ``The real story will take a few more quarters to unfold.''
Economy Watch
In economic reports, the pace of manufacturing in New York cooled in September. The New York Federal Reserve's general economic index fell to 14.7 from 25.1 in August, the bank said today. Economists in a Bloomberg News survey projected the index would drop to 18. Readings greater than zero signal expansion.
In Europe, the Dow Jones Stoxx 600 Index lost 1.5 percent. The Morgan Stanley Capital International Asia-Pacific Index retreated 0.5 percent.
The Russell 2000 Index, a benchmark for companies with a median market value of $644 million, dropped 1 percent to 775.81. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, fell 0.6 to 14,839.45. Based on its decline, the value of stocks decreased by $110.2 billion.
In other markets, the yield on the 10-year Treasury note was little changed at 4.45 percent and the dollar was little changed against the euro.
-- With reporting by Carol Massar, Julie Hyman, Rachel Wehrspann, Adrienne Toscano and Michael Patterson in New York. Editor: M.Regan (crn).
Citigroup Inc., Bank of America Corp. and Merrill Lynch & Co. led declines among financial companies as traders also pared bets the Federal Reserve will lower its benchmark rate by half a percentage point tomorrow. Marsh & McLennan Cos., the biggest insurance broker, dropped the most in three years after replacing the head of its flagship unit. Microsoft Corp. retreated after losing a European antitrust appeal.
The S&P 500 slipped 7.6, or 0.5 percent, to 1,476.65. The Dow Jones Industrial Average decreased 39.1, or 0.3 percent, to 13,403.42. The Nasdaq Composite Index dropped 20.52, or 0.8 percent, to 2,581.66. About 1.1 billion shares changed hands on the New York Stock Exchange, the second fewest for a full session this year.
The interest rate banks charge each other for overnight loans in pounds increased the most since June as Northern Rock customers withdrew savings after the bank was forced to seek emergency funding. Financial companies in the S&P 500 have lost 9.4 percent this year, the most among 10 industries, on concern credit-market losses will reduce earnings.
``We're seeing photos on the news of people lining up outside of banks,'' said Michael Barron, who manages about $1 billion as chief executive officer of Knott Capital Management in Exton, Pennsylvania. ``It seems to really illustrate the stress facing the overall economy and credit markets. This has investors nervous.''
Northern Rock
Northern Rock, the U.K. mortgage lender bailed out by the Bank of England last week, tumbled to a seven-year low in London as hundreds of clients ignored assurances from Chief Executive Officer Adam Applegarth and U.K. Chancellor of the Exchequer Alistair Darling that their deposits are secure. Customers removed at least 2 billion pounds ($4 billion), or about 8 percent of Northern Rock's total, since Sept. 14, according to an estimate by JPMorgan Chase & Co.
The lender needed emergency funding last week because it relies on the capital markets rather than deposits for 73 percent of its funds.
The overnight rate banks charge to lend British pounds soared 60 basis points to 6.47 percent today, according to the British Bankers' Association. The overnight rate for dollars rose 17 basis points to 5.30 percent.
Fed funds futures contracts show a 50 percent chance that the Fed will lower its benchmark rate from 5.25 percent to 4.75 percent tomorrow, down from 58 percent odds on Sept. 14. Traders are certain of a cut of at least a quarter point.
'Psychology of Fear'
An unfounded concern that the U.S. economy will slip into a recession has pushed some stocks down too far, investor Laszlo Birinyi said.
``All the bad news is being magnified,'' said Birinyi, who helps manage about $600 million as president of Birinyi Associates Inc. in Westport, Connecticut. ``Good, solid companies which have nothing to do with finance, which are really immune from all these other issues, are being punished just as severely as stocks which are really tied to the issues.''
``Right now, we have that psychology of fear,'' said Birinyi.
Financial Shares Drop
Marsh & McLennan dropped $1.58, or 6 percent, to $24.60, an almost four-year low. Brian Storms stepped down as the company said it needed someone with different skills to serve as chief executive officer of its Marsh Inc. brokerage unit. Morgan Stanley analysts lowered the stock to ``underweight'' from ``equal weight,'' saying the ``uncertainty'' could weigh on customer relationships.
Financial shares were the biggest drag on the S&P 500, dropping 0.8 percent as a group.
Credit Suisse Group American depositary receipts decreased 61 cents to $63.80. The second-biggest Swiss bank and other lenders agreed to lower the amount of loans they'll initially sell for the buyout of First Data Corp. to $5 billion and cut the price to 96 cents on the dollar, according to three people with knowledge of the talks.
David Lilly, a spokesman for Kohlberg Kravis Roberts & Co., the company acquiring First Data, declined to comment, as did Bruce Corwin, a Credit Suisse spokesman in New York.
The decision to sell debt at a discount follows similar moves by lenders including Citigroup and JPMorgan in the takeovers of Alliance Boots Plc and Allison Transmission Inc.
Microsoft fell 32 cents to $28.73. The company lost its appeal of a European Union antitrust decision after three years of legal wrangling, forcing it to pay a record 497 million-euro ($689 million) fine and help rivals connect their products to the Windows operating system.
Goldman, RadioShack
Goldman Sachs Group Inc., the second-largest U.S. manager of hedge funds, retreated $2.98 to $187.61 after its Equity Opportunities hedge fund lost 1.8 percent in the first week of September, extending the slide that led to last month's $3 billion cash injection.
RadioShack Corp. declined $1.56, or 6.6 percent, to $22.10 for the biggest drop in the S&P 500. Credit Suisse said the third-largest U.S. electronics chain's investment in the video- game business may reduce earnings.
Merrill, PHH
Merrill Lynch slumped $1.80 to $72.85. The securities firm has reduced staffing at mortgage lender First Franklin Financial Corp. ``to be in line with current business requirements,'' spokesman Bill Halldin said in a telephone interview. He declined to say how many people would be fired.
PHH Corp. tumbled $4.26, or 15 percent, to $24.24. The mortgage lender and vehicle-fleet manager, which agreed to be bought by General Electric Co. and Blackstone Group LP, said the sale may unravel after Blackstone failed to get $750 million in loans.
About 10 stocks declined for every three that rose on the NYSE.
Monsanto Co. added $1.94 to $75.44. The world's biggest seed producer said earnings in the year ended Aug. 31 rose more than expected because of Latin American corn-seed sales, tax benefits and higher prices for weed killer.
Out of 10 S&P industry groups, only energy producers gained as oil advanced to a record for a fourth day, reaching $80.70 a barrel in New York on signs the Fed will lower interest rates tomorrow. Exxon Mobil Corp., the world's biggest oil company, rose 59 cents to $89.26. Chevron Corp., the second-largest U.S. oil company, gained 28 cents to $90.93.
Newell Rubbermaid, Ford
Newell Rubbermaid Inc. added $2.26, or 8.8 percent, to $28.02 for the steepest gain in the S&P 500. The maker of Graco baby buggies and Rolodex organizers raised its full-year earnings and third-quarter sales forecasts on strength in its home and family and tools and hardware units, as well as benefits from foreign currency rates.
Ford Motor Co., the second-biggest U.S. automaker, gained 25 cents to $8.28. Bear Stearns & Co. lifted its recommendation on the stock to ``outperform'' from ``peer perform,'' saying the company may benefit from a renegotiated labor contract between General Motors Corp. and the United Auto Workers.
Investors also awaited earnings reports from brokerage firms this week. Bear Stearns Cos., Morgan Stanley and Lehman Brothers Holdings Inc. will probably report profit declines, according to the average analyst estimates from Bloomberg surveys, while Goldman Sachs may post a gain from selling a company.
``We expect a calm and steady week on the brokerage announcements,'' said David Darst, who manages $728 billion as chief investment strategist at Morgan Stanley Global Wealth Management in New York. ``The real story will take a few more quarters to unfold.''
Economy Watch
In economic reports, the pace of manufacturing in New York cooled in September. The New York Federal Reserve's general economic index fell to 14.7 from 25.1 in August, the bank said today. Economists in a Bloomberg News survey projected the index would drop to 18. Readings greater than zero signal expansion.
In Europe, the Dow Jones Stoxx 600 Index lost 1.5 percent. The Morgan Stanley Capital International Asia-Pacific Index retreated 0.5 percent.
The Russell 2000 Index, a benchmark for companies with a median market value of $644 million, dropped 1 percent to 775.81. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, fell 0.6 to 14,839.45. Based on its decline, the value of stocks decreased by $110.2 billion.
In other markets, the yield on the 10-year Treasury note was little changed at 4.45 percent and the dollar was little changed against the euro.
-- With reporting by Carol Massar, Julie Hyman, Rachel Wehrspann, Adrienne Toscano and Michael Patterson in New York. Editor: M.Regan (crn).
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