July 30 (Bloomberg) -- Profits at U.S. companies may have dropped the most in at least a decade last quarter after credit writedowns triggered a combined $7.43 billion loss at Merrill Lynch & Co. and Lehman Brothers Holdings Inc.

Earnings of Standard & Poor's 500 Index companies have tumbled 24 percent from a year earlier, according to data compiled by Bloomberg on the 291 companies that had reported quarterly results through yesterday. As recently as July 3, analysts expected a drop of 11 percent.

Financial industry profits, which analysts estimated would fall 60 percent, have plummeted 87 percent. Record oil prices drove earnings of ConocoPhillips and Occidental Petroleum Corp. to the highest in their histories. The energy group of the S&P 500 has posted a 15 percent gain in profits so far.

``It's a tale of two sectors that are really driving things,'' said Dirk van Dijk, director of research at Zacks Investment Research in Chicago. ``On the bad side it's financials,'' he said in an interview. ``On the upside, it's energy.''

The benchmark S&P index, representing companies with a combined market value of $11.3 trillion, slipped 3.2 percent in the quarter, the worst showing for the period since 2002. The index fell 14 percent this year before today.

A 24 percent earnings drop would be the deepest since at least the second quarter of 1998, according to the earliest comparable Bloomberg data. Profits fell 23 percent in the third and fourth quarters of 2001 and in the fourth quarter of 2007.

Losing Streak

The decline marks the fourth straight quarter of reduced earnings for U.S. companies. The losing streak is the longest since the five quarters that ended in March 2002, when the U.S. was emerging from an eight-month recession. Excluding financial companies, profits have climbed 8.5 percent so far.

Lehman, the fourth-largest U.S. securities firm, posted a loss of $2.77 billion, or $5.14 a share. Merrill Lynch, the third-biggest U.S. securities firm, lost $4.65 billion, or $4.97 a share. Credit-market writedowns in the second quarter cost Merrill $9 billion and Lehman $4.9 billion.

Worldwide, banks and brokerages have reported more than $470 billion in writedowns and credit losses since the beginning of last year as mortgage-backed securities, collateralized debt obligations, leveraged loans and other fixed-income assets lost value.

Information technology earnings advanced 21 percent for the quarter, as Apple Inc. jumped 31 percent and Google Inc. gained 35 percent. Analysts had estimated the category would increase 13 percent, as of July 3.

Crude Oil Record

ConocoPhillips, the third-largest U.S. oil producer, posted the highest quarterly profit in its history, after crude prices climbed to a record and natural gas surged to a 2 1/2-year high. Net income of $5.44 billion, or $3.50 a share, topped analysts' average estimate by 2 cents.

U.S. oil futures climbed above $140 a barrel for the first time in June, and the average price during the period rose 90 percent from a year earlier.

Oil prices have crippled earnings of consumer companies, including automaker Ford Motor Co., home furnishings retailer Bed Bath & Beyond Inc. and hotelier Marriott International Inc.

``Because of high oil prices, a weak housing market and a weak job market, the consumer is under unprecedented stress,'' Alec Young, a New York-based equity strategist at Standard & Poor's, said in an interview.

Earnings for 41 companies that rely on consumers' discretionary spending that reported through yesterday have declined 22 percent, less than the 24 percent decrease projected by analysts.

`Nasty Earnings'

``A lot of it does come down to the auto companies,'' Zacks' van Dijk said. ``Pretty nasty earnings from Ford.''

Ford, the world's third-biggest automaker, posted a record quarterly loss of $8.7 billion, or $3.88 a share, as $4-a-gallon gasoline trimmed demand for the pickup trucks and sport-utility vehicles that generate a majority of its U.S. sales. Ford's loss included a writedown of $8 billion for plant closings and the declining value of leased vehicles owned by its credit unit.

Marriott, the world's largest hotel chain, reported a 24 percent drop in profit, and forecast declines for the rest of the year, as U.S. business and personal travel fell.

For the year, S&P 500 companies' earnings will rise 1.6 percent, helped by a fourth-quarter surge, S&P's Young said.

There will be ``just a massive rebound in financial earnings,'' Young said. Comparisons with the fourth quarter of 2007 will be easier because of writedowns firms took in the period, he said.

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net.

Last Updated: July 30, 2008 00:02 EDT