April 14 (Bloomberg) -- U.S. stocks fell for a second day after Wachovia Corp. reported an unexpected first-quarter loss and Goldman Sachs Group Inc. predicted more disappointing earnings will drive the market lower in coming weeks.

Wachovia, the fourth-largest U.S. bank, retreated to a seven-year low after cutting its dividend and saying it plans to raise $7 billion to replenish capital depleted by mortgage losses. Citigroup Inc. fell after Merrill Lynch & Co. said a slowdown in consumer finance and capital markets will hurt profits. International Business Machines Corp. and Exxon Mobil Corp. gained, helping to limit losses in the Dow Jones Industrial Average.

Fewer than 1.2 billion shares changed hands on the New York Stock Exchange, the slowest trading day of the year. The Standard & Poor's 500 Index slipped 4.51 points, or 0.3 percent, to 1,328.32. The Dow lost 23.36, or 0.2 percent, to 12,302.06. The Nasdaq Composite Index fell 14.42, or 0.6 percent, to 2,275.82. On the NYSE, 1,056 stocks declined and 798 advanced.

``The news out of Wachovia would suggest the environment has probably deteriorated faster in recent weeks, to a greater extent than people may have anticipated,'' said Jonathan Armitage, the New York-based head of U.S. large-cap equities at London-based Schroders Plc., which oversees $280 billion. Banks face ``a tougher environment for the consumer, whether it's housing- or mortgage-related, or direct-to-consumer lending.''

`Harbinger'

The S&P 500 has fallen in four of the last five trading sessions after profits missed analysts' estimates at Alcoa Inc. and General Electric Co. last week. First-quarter earnings have been ``awful'' and are a ``harbinger of things to come,'' a team led by New York-based David Kostin, Goldman's U.S. investment strategist, wrote in a note to clients today.

Profits at S&P 500 companies are expected to fall 12.3 percent in the first quarter and 3.8 percent in the second, according to analyst estimates compiled by Bloomberg.

A rally in energy companies briefly led the market higher after oil prices advanced to a record, a government report showed gas-station receipts propped up sales at retailers last month, and the head of Brazil's oil agency said the offshore Carioca prospect may be the world's third-largest field.

Wachovia sank $2.26, or 8.1 percent, to $25.55 after reporting a loss of 20 cents a share, compared with profit of $1.20 a share a year earlier, because of subprime-infected mortgage holdings. Chief Executive Officer Kennedy Thompson said he was ``deeply disappointed'' after Wachovia posted its first quarterly loss since 2001 and reduced the dividend to preserve $2 billion of capital.

Citigroup

Citigroup fell 85 cents to $22.51, for the second-biggest decline in the Dow average. Merrill analyst Guy Moszkowski cut his 2008 and 2009 earnings estimates, citing a slowdown in consumer finance and capital-markets growth. Moszkowski reduced his 2008 per-share profit forecast to 14 cents from 24 cents and his 2009 prediction to $3.53 from $4.04.

Financial shares in the S&P 500 slid for a fifth day to the lowest since March 17, when the group of banks, brokers, insurers and real-estate investment trusts dropped to an almost five-year low. All 23 banks and 28 of 30 diversified financial companies fell.

``There are lots more writedowns still to happen,'' Andy Lynch, who manages $2.9 billion at Schroder Investment Management in London, said in an interview with Bloomberg Television. As consumer spending slows, ``banks are going to start losing money on consumer credit even more than they have so far.''

Federated Investors Inc. fell $1.10 to $33.09. The asset management company that specializes in money-market funds said it earned less than analysts estimated in the first quarter as it waived fees on the funds because the yields on the securities they hold declined to levels that didn't cover the fees.

News Corp.

News Corp., the media company controlled by Rupert Murdoch, fell the most in five years, losing 85 cents, or 4.6 percent, to $17.57. Sanford C. Bernstein & Co. and UBS AG analysts cut their outlook for the stock, citing concerns growth will slow. Bernstein's Michael Nathanson in New York reduced his 12-month share-price target to $21 from $24 and lowered his rating to ``market perform'' from ``outperform'' in a note today. UBS's Michael Morris cut his price projection to $25 from $26.

Scotts Miracle-Gro Co. lost 88 cents to $33.56. The maker of Miracle-Gro plant food said second-quarter profit fell following a late start to the growing season. Earnings will be about $1.14 to $1.18 a share in the three months through March 29, compared with $1.40 a year earlier, Scotts said.

Energy Rally

Exxon, the largest U.S. oil company, led energy companies to a 1.8 percent gain as crude oil surpassed last week's record closing price, rising $1.62 to $111.76 a barrel. Exxon added $1.08, or 1.2 percent, to $89.70 for the biggest gain in the Dow.

Hess Corp., the fifth-largest U.S. oil company, rose the most in the S&P 500 after the head of Brazil's National Oil Agency said an offshore oil field known as Carioca being explored by Brazil's state-controlled oil company may be the world's third-largest. A spokesman for Petroleo Brasileiro SA, or Petrobras, said the company is still studying the find. Hess, which owns a 40 percent stake in an adjacent field, rose $8.43, or 9.1 percent, to $101.19.

Transocean Inc., the world's largest offshore oil and gas driller, rose $6.81 to a record $151.89. Noble Corp., the largest U.S. drilling contractor working off Mexico's coast, added $2.48 to $55.25.

Circuit City Stores Inc. jumped $1.07, or 27 percent, to $4.97. Blockbuster Inc., the world's largest movie-rental chain, made an unsolicited bid, worth as much as $1.35 billion, for the second-biggest U.S. electronics retailer. Blockbuster said it wrote to Circuit City Chief Executive Officer Philip Schoonover offering at least $6 a share, subject to due diligence. Blockbuster tumbled 32 cents, or 10 percent, $2.81.

Retail Sales

Wal-Mart Stores Inc., the world's largest retailer, climbed 35 cents to $55.15, a three-year high.

Retail sales in the U.S. rose in March, reflecting increases in receipts at service stations as gasoline prices jumped. Purchases advanced 0.2 percent last month after a 0.4 percent decline in February, the Commerce Department said. The median forecast of economists surveyed by Bloomberg News projected no change.

IBM added $1.28 to $117.28. Goldman raised its share-price forecast and earnings estimates for the world's largest computer- servi[bn:WBTKR=HPQ:US] ces company.

Hewlett-Packard Co. [] rose 35 cents to $45.82. Merrill added the world's largest maker of personal computers to its ``U.S. 1'' list ``because it is a defensive, large-cap, diversified play'' that's likely to show margin improvement, analysts led by Jeff Fidacaro wrote in a report.

Airlines, NutriSystem

Northwest Airlines Corp. and Delta Air Lines Inc. led airline shares higher after people familiar with the talks said a merger of the two to create the world's largest carrier may be announced as early as tomorrow. Northwest, the fifth-largest U.S. carrier, rose 26 cents to $11.22. Delta, the third-biggest, gained 47 cents to $10.48.

NutriSystem Inc. added $1.31 to $19.52. The weight-loss company will be added to the S&P SmallCap 600 Index after the close of trading tomorrow, replacing Frontier Airlines Holdings Inc., Standard & Poor's said. Frontier filed for bankruptcy last week.

The Russell 2000 Index, a benchmark for companies with a median market value 96 percent smaller than the S&P 500's, dropped 0.3 percent to 686.07. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, fell 0.3 percent to 13,410.39. Based on its decline, the value of stocks dropped by $56.06 billion.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.

Last Updated: April 14, 2008 18:00 EDT