Nov. 4 (Bloomberg) -- U.S. stocks fell this week, snapping the longest such winning streak since 2005, as reports on manufacturing and consumer spending suggested that the economy may slow enough to curtail profit growth.

Retailers led the decline after Wal-Mart Stores Inc. forecast its worst monthly sales performance in more than 10 years and a gauge of consumer confidence unexpectedly dropped. Telecommunications shares slumped as Verizon Communications Inc. reported earnings that trailed some analysts' estimates.

Data that showed rising labor costs and falling unemployment also damped optimism that the Federal Reserve may cut interest rates. The Dow Jones Industrial Average extended its retreat from a record for a sixth day, sliding below the 12,000 level it had crossed for the first time ever last month.

``The market has priced in a pretty rosy situation,'' said Alec Young, an equity market strategist at Standard & Poor's in New York. ``You've got a situation where growth is slowing, but the Fed is not riding to the rescue right away.''

For the week, the Dow industrials dropped 0.9 percent to 11,986.04. The 30-stock gauge has retreated every session since reaching a record on Oct. 26, the longest daily losing streak since June 2005.

The Standard & Poor's 500 Index declined 1 percent to 1364.30, its biggest drop in almost three months. Both the Dow average and the S&P 500 fell for the first time in six weeks.

A slump in shares of Whole Foods Market Inc. weighed on the Nasdaq Composite Index, which slid 0.8 percent to 2330.79.

November Retreat

Expectations that better-than-expected earnings and a drop in oil prices will support economic growth without spurring inflation had sent the Dow industrials to a record on Oct. 26, while the S&P 500 reached a level not seen since November 2000.

The gauges have stumbled since then as data showed the economy grew at the lowest rate in more than three years, manufacturing slowed and labor costs increased.

Manufacturing in the U.S. expanded at the slowest pace in more than three years last month, a private report indicated on Nov. 1. The Institute for Supply Management's factory index fell to 51.2 from 52.9 in September. Economists in a Bloomberg News survey expected 53. Readings above 50 signal expansion.

Separate data indicated that consumer spending unexpectedly slowed even as incomes rose.

The Commerce Department said personal spending increased 0.1 percent in September, down from a 0.2 percent gain the previous month. Economists expected a 0.2 percent rise. Incomes increased 0.5 percent in September.

Wal-Mart

The report, along with a forecast from Wal-Mart, suggested that oil's slide from a July record may do little to bolster household spending in the holiday shopping season.

Wal-Mart fell 6.3 percent to $47.53 for the worst performance in the Dow average. The world's largest retailer forecast that sales at stores open at least a year will be unchanged this month as disappointing clothing sales and disarray from store renovations hurt results. The estimate means Wal-Mart is headed for its worst performance since April 1996.

Whole Foods plunged 29 percent to $46.26 for the biggest slide in the S&P 500. The largest U.S. natural-foods grocer had its biggest one-day plunge ever yesterday after cutting its 2007 sales forecast.

Retailers Slide

The declines in Wal-Mart and Whole Foods helped send a gauge of food and household products merchants down 4.8 percent, the biggest drop among two-dozen S&P 500 industry groups.

A separate measure of retailers, including Gap Inc., slid 2.6 percent. The Conference Board said its index of consumer sentiment fell to 105.4 last month from a revised 105.9 in September. Economists had estimated a reading of 108.

Gap retreated 5.6 percent to $19.57. The largest U.S. clothing chain said that third-quarter profit was about 21 cents to 23 cents a share. Analysts expected 23 cents, the average estimate in a survey by Thomson Financial.

Verizon had the biggest retreat in the Dow average besides Wal-Mart, slumping 5.5 percent to $36.70. The second-largest U.S. telephone company lost local customers and accelerated spending on its faster network to offer television service, disappointing investors who expected profit to rise more.

Excluding Latin American assets that the company agreed to sell in April, third-quarter profit was 64 cents a share. Analysts surveyed by Thomson expected an average of 66 cents.

Telecommunication companies in the S&P 500 fell 2.3 percent. Qwest Communications International Inc., the fifth-largest U.S. telephone company, retreated 3.7 percent to $8.42 after it lost more telephone lines than analysts anticipated.

Earnings Estimates

The results from Verizon and Qwest spurred concern about the earnings outlook for telephone companies. Profit growth for all S&P 500 companies is expected to slow to 11 percent this quarter and 8.4 percent in the first three months of 2007 from 17 percent last period, data from Thomson on Oct. 27 showed.

Reports on labor costs and unemployment suggested that central bankers may have little room to cut interest rates even as profit growth decelerates.

U.S. wage costs increased at a 3.8 percent pace in the third quarter, the Labor Department said, exceeding economists' estimates for a 3.4 percent gain. Costs are up 5.3 percent in the 12 months though September, the biggest gain since 1982.

That data may undermine the Fed's statement last week that inflation is ``likely to moderate over time.'' Policy makers kept their target rate at 5.25 percent the past three meetings, after 17 straight increases.

`Spooked'

``The market's kind of spooked, a little bit afraid of inflation right now,'' said Todd Clark, director of trading at Nollenberger Capital Partners, a San Francisco-based brokerage firm.

The unemployment rate fell to a five-year low of 4.4 percent in October, while companies added more workers in previous months than indicated, the Labor Department said.

Before the jobs report, interest-rate futures showed traders saw a 14 percent chance the central bank would cut the Fed funds target rate to 5 percent by the end of January. Following the report's release, the odds of a rate cut in both January and February fell to zero.

Declines in health-care shares including Tenet Healthcare Corp. and Humana Inc. also weighed on the market.

Tenet plummeted 18 percent to $6.84 for the second-biggest drop in the S&P 500. The second-largest U.S. hospital chain said third-quarter losses from continuing operations were 5 cents to 7 cents a share. Analysts had expected 1 cent, according to a survey by Thomson, which doesn't disclose the parameters of its estimates to Bloomberg.

Humana, the second-largest provider of Medicare drug benefits, fell 14 percent to $56.79 as it reported earnings that missed analysts' estimates and said enrollment growth may slow.

American Power Conversion Corp., which makes surge protectors for computers and other devices, had the biggest rally in the S&P 500, soaring 27 percent to $30.15. France's Schneider Electric SA, the world's biggest maker of circuit breakers, offered to buy the company for $6.1 billion.

To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net.

Last Updated: November 4, 2006 07:41 EST