U.S. stocks dropped for a second day this week as worse-than-estimated losses at Morgan Stanley and Capital One Financial Corp. renewed concern that credit markets are still deteriorating. Morgan Stanley, the fifth-biggest U.S. bank by assets, tumbled 8 percent as real-estate and debt-related writedowns overwhelmed trading gains. Capital One, a Virginia-based credit- card company, slid 8.3 percent. Advanced Micro Devices Inc., the second-largest maker of personal-computer processors, fell 4.2 percent after posting a wider loss and projecting a drop in sales this quarter amid “limited visibility.” “It’s going to be a long and difficult recovery process for most of the financial companies,” said Bruce McCain, chief investment strategist at Cleveland-based Key Private Bank, which manages $22 billion. “People started to see some indications that maybe the economy is bottoming, but there’s that uncertainty factor.” The Standard & Poor’s 500 Index slid 0.9 percent to 842.89 at 9:35 a.m. in New York. The Dow Jones Industrial Average dropped 52.41 points, or 0.7 percent, to 7,917.15. Europe’s Dow Jones Stoxx 600 Index lost 0.9 percent after GlaxoSmithKline Plc and Heineken NV reported disappointing results. The MSCI Asia- Pacific Index slipped less than 0.1 percent. Earnings per share decreased 26 percent on average at the 105 companies in the S&P 500 that have published results since April 7, according to Bloomberg data. Analysts estimate that profits in the measure dropped for the seventh straight quarter in the January to March period, the longest stretch of declines since at least the Great Depression. Morgan Stanley Morgan Stanley dropped $1.96 to $22.69. The company cut its dividend to 5 cents a share as it reported a first-quarter loss of $177 million, or 57 cents a share. The average estimate of 19 analysts surveyed by Bloomberg was for a loss of 8 cents a share. The company had a loss of $1.3 billion in December before the start of the new fiscal year. Capital One said yesterday after the close that it had a $111.9 million first-quarter loss as it added $124.1 million to reserves for soured loans. The bank said its previous estimate of $8.6 billion in unpaid 2009 loans was too low and declined to update the guidance because of “significant uncertainty.” The stock slid $1.25 to $13.80. “Everyone has been expecting bad numbers so the focus is on the statements from management to try and get some guidance,” said Nick Skiming, who oversees about $2 billion at Ashburton Ltd. in Jersey, Channel Islands. “Clearly the banking sector is what the market really needs to focus on.” IMF Forecast The International Monetary Fund said the global recession will be deeper and the recovery slower than previously thought as financial markets take longer to stabilize. The Washington- based IMF said in a new forecast that the world economy will shrink 1.3 percent this year, compared with its January projection of 0.5 percent growth. Treasury Secretary Timothy Geithner said that global policy makers may need to alter their strategies to combat the financial and economic crisis as conditions “evolve.” Advanced Micro Devices Inc. lost 4.2 percent to $3.22. The company’s net loss widened to $414 million, or 66 cents a share, from $351 million, or 60 cents, a year earlier. Sales fell 21 percent to $1.18 billion after customers cut orders amid falling PC demand.

Source