Dec. 16 (Bloomberg) -- The Standard & Poor's 500 Index declined after Goldman Sachs Group Inc. said trading revenue fell from the previous quarter and Fannie Mae said a government ruling may cause a $9 billion earnings restatement.

The drop in financial shares damped enthusiasm surrounding acquisitions by companies such as Johnson & Johnson, the No. 1 maker of medical devices, and Symantec Corp., the world's largest maker of anti-virus programs for computers.

``M&A activity is going to pop some stocks,'' said Christopher Rowane, who helps manage $10 billion from Cincinnati for Huntington Asset Advisors Inc. ``But there are other problems for the market.''

The S&P 500 slid 2.51, or 0.2 percent, to 1203.21 and the Nasdaq Composite Index lost 16.40, or 0.8 percent, to 2146.15. The benchmarks had their first declines in four days.

Johnson & Johnson rose after agreeing to buy Guidant Corp. for $25.4 billion, sending the Dow Jones Industrial Average to its fourth straight advance. The index added 14.19, or 0.1 percent, to 10,705.64.

About three stocks fell for every two that rose on the New York Stock Exchange. Some 1.79 billion shares traded on the Big Board, the most in more than five months.

The S&P 500 yesterday climbed to its highest close since Aug. 3, 2001, while the Nasdaq Composite advanced to its highest since June 2001. The S&P 500 has gained 8.2 percent this year, while the Nasdaq has jumped 7.1 percent.

Trading Day

Benchmark indexes rose in early trading after a government report showed the number of Americans filing first-time claims for unemployment insurance benefits last week fell to a five- month low. The indexes peaked at midday after a measure of manufacturing in the Philadelphia region exceeded forecasts.

The rally faded as oil prices rebounded from a loss of as much as 2.7 percent. Crude oil for January delivery settled at $44.18 a barrel in New York, a cent lower than yesterday.

Goldman Sachs tumbled $3.85, or 3.5 percent, to $105.40 for their biggest drop in 19 months. The third-largest U.S. securities firm said revenue from currencies and commodities trading, the biggest part of the firm's business, fell 22 percent from the third quarter. Fees from offering mergers advice slipped 8 percent.

Fannie Mae

Fannie Mae, the biggest source of money for U.S. home mortgages, declined $1.39 to $69.30. The company may have to restate earnings after the Securities and Exchange Commission said it broke accounting rules. The $9 billion figure is what the company estimated last month it lost over the past three years if the SEC determines it erred in recording certain financial contracts.

``Companies are going to find themselves challenged for growth'' next year, said Charles Bath, who helps manage $500 million at Diamond Hill Investment Group in Columbus, Ohio. ``Profitability is going to decline and interest rates are increasing. That generally is not conducive to a good rate of return for equities.''

Johnson & Johnson added $2.55 to $63.45. The company said it will pay $76 in cash and stock for each share of Guidant, adding electrical cardiac-care devices to a lineup of thousands of products ranging from Band-Aids to cancer treatment medications. Guidant lost 35 cents to $71.70.

Shares of Symantec, United Technologies Corp., and Noble Energy Inc. all declined after the companies announced multibillion-dollar acquisitions.

Takeovers

The deals have helped make this the busiest quarter for mergers in more than four years. Companies have spent $575 billion on takeovers since the start of October, the most since the second quarter of 2000.

Mergers ``are a natural outgrowth of an economy that is growing and a decently strong stock market,'' said Richard Weiss, who oversees $7 billion as chief investment officer at City National Asset Management in Beverly Hills, California. `It's a confirmation that things are good.''

Symantec plunged $2.25, or 8.2 percent, to $25.13, for the second-biggest drop in the S&P 500. The company agreed to buy Veritas Software Corp. for $13.5 billion, the biggest software purchase in six years. Veritas slipped 12 cents to $27.99.

Symantec shares have dropped 24 percent since Dec. 13, the day before the New York Times reported the companies were in talks.

United Technologies

United Technologies, which offers security services through its Chubb unit, slipped 40 cents to $102. The company agreed to buy U.K. fire-protection company Kidde Plc for $2.8 billion to expand its range of building-services products.

Noble Energy slid $2.16 to $59.38 after the natural gas producer said it agreed to buy Patina Oil & Gas Corp. for about $2.76 billion in cash and stock. Including assumption of debt, the purchase is valued at $3.4 billion, the companies said. Patina Oil jumped $4.69, or 15 percent, to $36.61.

Shares of Glamis Gold Ltd. lost $1.42 to $17.75 after the producer of gold in Nevada and Honduras made a hostile takeover bid for Canada's Goldcorp Inc. for $3.38 billion in stock. Glamis Chief Executive Kevin McArthur went directly to Goldcorp investors after the board rejected the bid. Goldcorp's U.S. shares increased $1.11 to $15.09.

`Catch-Up'

Health-care shares rose as investors shifted money into this year's worst performing stocks. A gauge of 55 health-care companies has advanced 0.7 percent this year, the smallest gain among the S&P 500's 10 industry groups.

Merck & Co. advanced $1.31 to $31.79, trimming its loss for the year to 31 percent. The maker of the Vioxx painkiller, which was withdrawn from the market in September, is the worst performing stock in the Dow average this year.

Abbott Laboratories, the maker of HIV tests, advanced $1.84 to $46.19. Profit next year will be between $2.47 to $2.53 a share excluding some items, the company said. On that basis, Abbott was expected to earn $2.50, according to the average estimate of analysts surveyed by Thomson.

``We see this as a time for (pharmaceutical stocks) to play catch-up,'' said City National's Weiss. ``Other sectors have run up so high that health-care stocks are relatively attractive.''

Apollo Group Inc. fell $5.70 to $79.63. The largest U.S. for- profit education company said fiscal second-quarter sales will be $507 million to $511 million, less than the average analyst estimate for revenue of $511.6 million, according to Thomson Financial.

Ten initial public offerings began trading today and all but two of the shares advanced.

Arbinet-thexchange Inc., an Internet-based business-to- business trading exchange, had the biggest gain, surging $11.50, or 66 percent, to $29. Advance America Cash Advance Centers Inc., which provides cash for people before their next payday, jumped $5.50, or 37 percent, to $20.50.

Abbott Laboratories (ABT US)
Advance America Cash Advance Centers Inc. (AEA US)
Apache Corp. (APA US)
Apollo Group Inc. (APOL US)
Arbinet-thexchange Inc. (ARBX US)
Fannie Mae (FNM US)
Glamis Gold Ltd. (GLG US)
Goldcorp Inc. (GG US)
Goldman Sachs Group Inc. (GS US)
Johnson & Johnson (JNJ US)
Merck & Co. (MRK US)
Noble Energy Inc. (NBL US)
Patina Oil & Gas Corp. (POG US)
Symantec Corp. (SYMC US)
United Technologies Corp. (UTX US)
Veritas Software Corp. (VRTS US)

To contact the reporter on this story: Edgar Ortega in New York at ebarrales@bloomberg.net.

Last Updated: December 16, 2004 17:33 EST