May 10 (Bloomberg) -- U.S. stocks fell, sending the Dow Jones Industrial Average below 10,000 for the first time this year, as speculation that the Federal Reserve may increase its benchmark interest rate as soon as next month fueled concern profit growth will slow.
``Stocks will be driven quite a bit going forward by what happens to interest rates,'' said Brett Gallagher, who helps oversee $6 billion as head of U.S. equities at Julius Baer Investment Management Inc. in New York. ``Everybody knows rates will go up. The question is when and by how much.''
Citigroup Inc. shares dropped after the world's largest financial company said it will set aside $4.95 billion in the second quarter to cover legal costs, including a settlement with investors in the bankrupt WorldCom Inc. Exxon Mobil Corp. and other energy stocks fell along with a slide in oil prices.
The Dow average lost 156.63, or 1.6 percent, to 9960.71 at 11:57 a.m. in New York. It fell below 10,000 for the first time since Dec. 12. Benchmark indexes in Asia and Europe slumped.
The Standard & Poor's 500 Index shed 15.67, or 1.4 percent, to 1083.02. The Nasdaq Composite Index sank 31.34, or 1.6 percent, to 1886.62.
More than 11 stocks fell for every one that rose on the New York Stock Exchange. Some 852 million shares changed hands on the Big Board, 38 percent more than the same time a week ago.
Speculation a rate increase will come as early as June mounted after a government report showed Friday that U.S. companies added 288,000 workers in April, exceeding the highest economist forecast and strengthening the central bank's case to start raising rates. Higher borrowing costs can slow company and consumer spending, hurting corporate profit growth.
Profit Growth
First-quarter profit for S&P 500 companies jumped 27 percent, based on results for 448 members that have reported and estimates for the rest, according to Thomson Financial. That's double the 13.4 percent forecast on Jan. 1. Growth is expected to slow to 17.7 percent in the second quarter and 12.6 in the third, according to Thomson.
The employment report sparked a selloff on the NYSE Friday, with 3,185 stocks declining and 261 rising. That 12-to-1 ratio is the broadest since Oct. 27, 1997, according to Schaeffer's Investment Research in Cincinnati.
The losses circled the globe as the Morgan Stanley Capital International Asia-Pacific Index lost 5.5 percent, its biggest decline since Sept. 12, 2001. Europe's Dow Jones Stoxx 50 fell 2.4 percent and the Stoxx 600 shed 2.7 percent, with 581 of the 600 members falling.
At 1 percent, the U.S. central bank's benchmark rate is the lowest in almost 46 years. Market interest rates already have risen. The yield on the benchmark 10-year note climbed Friday to 4.78 percent, the highest since July 2002.
`Big Move'
``That's a big move for people to stomach,'' said Michael Sutton, who oversees $7.5 billion as chief investment officer at Pilgrim Baxter and Associates Ltd. in Wayne, Pennsylvania. The 10- year Treasury has traded at a yield of more than 4 percent since April 2.
Concern about rising energy costs also contributed to last week's decline after crude oil prices settled at $39.93 on Friday, the highest level since October 1990, when Iraq occupied Kuwait. Today, crude futures for June delivery slipped from that peak after Saudi Arabian oil minister Ali al-Naimi said an increase in oil supply is ``essential.''
Citigroup lost $1.56 to $45.16. The company said part of the reserve will cover a payment of $2.95 billion, or $1.64 billion after-tax, to resolve the WorldCom lawsuit. The rest will go toward a potential settlement of litigation by investors in failed energy trader Enron Corp. and other pending lawsuits.
Energy Stocks
An index of oil and gas stocks had the biggest decline among the S&P 500's 10 industry groups, falling 3.2 percent. Saudi Arabia's oil minister said OPEC should boost production quotas by 6.4 percent to prevent rising prices from hurting the world economy.
Exxon, the world's largest publicly traded oil company, sank $1.29 to $41.96 and ChevronTexaco Corp., the second-biggest U.S. oil company, dropped $2.60 to $89.05.
SunTrust Banks Inc. lost $5.38 to $61.50, while National Commerce Financial Corp. shed 88 cents to $30.92. SunTrust, the eighth-largest U.S. bank, yesterday agreed to buy National Commerce for $6.98 billion in cash and stock. SunTrust will pay $33.46 for each share of National Commerce, 5.2 percent more than Friday's closing price.
Boeing Contract
Boeing Co. fell 81 cents to $42.59. The No. 2 U.S. defense contractor's proposed $23 billion contract to lease as many as 100 planes to the U.S. Air Force for use as refueling tankers may be threatened after a report by the Defense Science Board said the aircraft may not be needed, the New York Times said, citing unidentified people who have seen the report.
Sprint Corp. declined 42 cents to $17.34. The third-biggest U.S. long-distance telephone company by sales said it plans to fire 2,550 workers to reduce costs, 550 more than previously planned. The cuts will cost as much as $90 million before taxes, Sprint said in its filing to the U.S. Securities and Commission.
McDonald's Corp., the world's largest restaurant chain, added 19 cents to $26.90. The company said U.S. sales climbed 13.5 percent in April, helped by new menu items. Global sales at restaurants open at least 13 months rose 10.5 percent from the year-earlier period, while sales in Europe gained 5 percent after falling 2.9 percent in March.
