US STOCKS-Market slips as banks drag after Wachovia loss

(Updates to early afternoon, changes byline)

By Kristina Cooke

NEW YORK, April 14 (Reuters) - U.S. stocks inched lower on Monday after an unexpected quarterly loss from Wachovia Corp (WB.N: Quote, Profile, Research) hurt bank shares, overshadowing a surprise rise in March retail sales.

Goldman Sachs added to the market's negative tone after it said the quarterly earnings season, which is just starting, looks "awful" and that reports still to come will be generally disappoint and drive the S&P 500 lower in coming weeks.

Wachovia said it would cut its dividend, eliminate jobs and raise capital of $7 billion after becoming the latest casualty of the global credit crunch. For details, see [ID:nN14343221]. The No. 4 U.S. bank's stock fell 10 percent, dragging the S&P financial sector index down 2.1 percent.

But retail sales kept a floor under the market after data showed a modest increase in March, pushed up by a jump in gasoline sales, according to a government report. An S&P index of retailers' shares .RLX was up 0.7 percent. Energy companies also helped, giving the biggest boost to the S&P 500 as the price of oil CLc1 rose above $111 a barrel for a time.

With earnings season in full swing, investors are taking their trading cues from corporate results. Wall Street analysts expect S&P 500 earnings to show a 13.8 percent decline in quarterly profits compared with an 11.8 percent drop projected one week ago, according to Reuters Estimates.

"We're in the midst of this earnings season, so there is some nervousness about the outlook," said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut.

"And you still have the financial drag. There's Wachovia, which is down 10 percent, and the group still is not showing signs of stabilizing. But oil is helping."