March 6 (Bloomberg) -- U.S. stocks suffered their longest losing streak this year as rising bond yields drove shares to a third day of declines.

Utility and bank shares, among the most sensitive to changes in borrowing costs, fell as the yield on the Treasury's 10-year note reached the highest level since the Federal Reserve began raising interest rates in June 2004. The losses outweighed gains tied to takeover offers, including AT&T Inc.'s $67 billion bid for BellSouth Corp.

``The mystery and concern around the Fed is certainly part of why we're stuck,'' said Robert Doll, who oversees $539 billion as chief investment officer at Merrill Lynch Investment Managers in Plainsboro, New Jersey. ``Until we get some of that resolved, I think we're in this period of two steps forward, two steps back.''

Exxon Mobil Corp. and Newmont Mining Corp. retreated as lower commodity prices hurt energy and metals producers. Oil declined for the first time in a week in New York trading.

The Standard & Poor's 500 Index slid 8.97, or 0.7 percent, to 1278.26. The Dow Jones Industrial Average retreated 63, or 0.6 percent, to 10,958.59. The Nasdaq Composite Index fell 16.57, or 0.7 percent, to 2286.03. All three indexes have not declined for three straight days since Dec. 20.

More than seven stocks fell for every three that rose on the New York Stock Exchange. Some 1.65 billion shares changed hands on the Big Board, in line with the three-month daily average.

Computer-related shares fell before Texas Instruments Inc. said first-quarter sales may miss its highest estimate. Shares of the world's biggest maker of mobile-phone chips lost as much as 4 percent to $31.05 after the forecast, which followed the close of U.S. exchanges.

Acquisitions

AT&T's BellSouth purchase and other acquisitions helped support the market earlier in the day. Education Management Corp., agreed to be bought by Providence Equity Partners Inc. and Goldman Sachs Group Inc. for $3.4 billion, while CarrAmerica Realty Corp. will be sold to Blackstone Group LP.

Yields on the U.S. 10-year Treasury note increased on speculation a government report March 10 will show job growth is fast enough to spur the central bank to lift borrowing costs at least twice more. The yield rose 6 basis points, or 0.06 percentage point, to 4.74 percent in New York, according to bond broker Cantor Fitzgerald LP, the highest since June 29, 2004.

Economic Reports

Economic reports today showed a smaller-than-expected decrease in factory orders and an unexpected drop in pending sales of existing homes.

Factory orders declined 4.5 percent in January, the most since July 2000, the Commerce Department said, as bookings for Boeing Co. aircraft declined. Economists in a Bloomberg News survey expected a 5.4 percent drop. Not counting transportation equipment, orders increased 1.6 percent.

The National Association of Realtors said its index of pending home resales fell 1.1 percent in January. Sales were forecast to rise 0.3 percent, according to economists. The slowing housing market may curb economic growth as consumers are less able to use rising home values to finance spending.

Bank stocks fell 0.5 percent on concern that higher interest rates will reduce the value of bonds owned by banks, brokers and insurers, and lower demand for mortgages and loans.

Countrywide Financial Corp., the biggest U.S. mortgage lender, retreated 48 cents to $34.66.

Utilities

An index of utilities lost 2.2 percent for the second-worst performance among 10 industry groups in the S&P 500. Shares of utilities may become less attractive due to the higher bond yields. The utilities gauge pays a 3.5 percent dividend, almost twice the S&P 500's 1.8 percent yield.

Shares of TXU Corp., the largest power producer in Texas, lost $2.26 to $50.67. Public Service Enterprise Group Inc., owner of New Jersey's largest utility, fell $2.33 to $66.63.

The pending retirement of Representative Bill Thomas, who steered President George W. Bush's five tax cuts into law as chairman of the House Ways and Means Committee, contributed to the market's drop, traders said. Thomas has served in Congress since 1979.

Crude oil decreased as ministers from the Organization of Petroleum Exporting Countries signaled they intend to keep oil output near a two-decade high. Oil, which has failed to rise above $64 a barrel since hitting a 2006 closing low on Feb. 15, declined 2 percent to $62.41 in New York.

Energy Shares

A measure of energy shares lost 2.8 percent for the worst performance in the S&P 500 among 10 industry groups, with all 30 oil and gas stocks declining at least 1.4 percent. Exxon Mobil, the world's biggest oil company, dropped $1 to $59.98.

``Energy is such a large part of the market these days that it can really pull things lower,'' said Andrew Seibert, who helps manage $1.2 billion at S&T Wealth Management in Pittsburgh.

Newmont, the largest gold producer, declined $2.34 to $50.83 as gold prices fell the most in three weeks. Gold declined 2 percent as the drop in oil eroded the appeal of the precious metal as an inflation hedge.

An index of phone companies jumped 1.8 percent for the best performance among 10 industries in the S&P 500. The group also has the top rally this year, gaining 13 percent after notching the steepest loss in 2005.

BellSouth, AT&T

BellSouth, the No. 3 U.S. local phone company, rose $3.04, or 9.7 percent, to $34.50 for the biggest gain in the S&P 500.

AT&T will pay $37.09 in stock for each BellSouth share, the companies said yesterday. AT&T, the largest U.S. provider of telephone services, will also take on $17 billion of BellSouth debt and buy back $10 billion of shares. The deal will hand AT&T full ownership of country's No. 1 mobile-phone operator, Cingular Wireless LLC. AT&T lost 97 cents, or 3.5 percent, to $27.02 for the steepest loss in the Dow average.

Among other phone companies, Qwest Communications International Inc., the No. 4 U.S. local phone company, added 25 cents to $6.84. Alltel Corp., the largest U.S. rural phone company, increased $2.29 to $66.61.

Tellabs Inc. fell $1.98 to $13.03 on concern the maker of computer networking equipment will lose out on the deal. ``The merger news could pressure'' Tellabs, Morgan Keegan & Co. analyst Simon Leopold wrote in a note today, because it makes gear for BellSouth's high-speed Internet service.

Education Stocks

Education Management rallied $4.66 to $41.64. Providence Equity and Goldman agreed to pay $43 a share, 16 percent more than Education Management's closing price on March 3.

Corinthian Colleges Inc., which specializes in schools for health-care professionals, rose 90 cents to $14.34. Apollo Group Inc., the biggest U.S. for-profit education company, jumped $2.30 to $50.59.

An S&P 500 real estate index jumped 2.1 percent, its best performance in two months. Equity Office Properties Trust, the largest U.S. owner of office buildings, added $1.23 to $33.55.

CarrAmerica, a manager of office buildings in 12 U.S. markets, agreed to be acquired by buyout firm Blackstone Group LP for $5.6 billion, or $44.75 a share in cash. CarrAmerica added $3.45 to $44.53.

Public Storage Inc., the largest U.S. operator of self- storage facilities, gained $1.10 to $79.46. The company is close to buying rival self-storage company Shurgard Storage Centers Inc. for $3.2 billion, the Wall Street Journal said.

Shares of Research In Motion Ltd. jumped $10.84 to $82.76. The company agreed to pay $612.5 million to settle a patent dispute with NTP Inc. and avert a shutdown of its BlackBerry wireless e-mail service across the U.S.

Alltel Corp. (T US)
Apollo Group Inc. (APOL US)
AT&T Inc. (T US)
BellSouth Corp. (BLS US)
CarrAmerica Realty Corp. (CRE US)
Corinthian Colleges Inc. (COCO US)
Countrywide Financial Corp. (CFC US)
Education Management Corp. (EDMC US)
Equity Office Properties Trust (EOP US)
Exxon Mobil Corp. (XOM US)
Newmont Mining Corp. (NEM US)
Public Service Enterprise Group Inc. (PEG US)
Public Storage Inc (PSA US)
Qwest Communications International Inc. (Q US)
Research In Motion Ltd. (RIM US)
Texas Instruments Inc. (TXN US)
TXU Corp. (TXU US)

To contact the reporter on this story: Sophie Hayward in New York at Shayward2@bloomberg.net.

Last Updated: March 6, 2006 17:37 EST