Oct. 30 (Bloomberg) -- U.S. stocks tumbled, ending a seven- month streak of gains for the Standard & Poor’s 500 Index, as declines in consumer confidence and spending and the threat of a CIT Group Inc. bankruptcy raised concern over the durability of the economic recovery. The dollar and Treasuries gained, while commodities retreated.

CIT, the commercial lender, plunged 24 percent as investor Carl Icahn agreed to support its prepackaged bankruptcy plan. Citigroup Inc. tumbled 5.1 percent on a report that banking analyst Mike Mayo predicted a $10 billion writedown for this quarter. American Express Co. and Walt Disney Co. slid as Commerce Department data showed a drop in purchases and the Reuters/University of Michigan sentiment index weakened. MetLife Inc. lost 7.6 percent after a third straight quarterly loss.

“I’m well-spooked for the Halloween weekend,” said James Paulsen, who helps oversee $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “We can talk about disappointing consumer confidence data. Bank charge- offs are still happening. There’s a growing sense on the Street that there’s got to be a pullback.”

The S&P 500 sank 2.8 percent, the most since July 2, to 1,036.19 at 4:05 p.m. in New York and wiped out yesterday’s 2.3 percent surge triggered by government data showing the economy returned to growth following the worst slump in seven decades. The Dow Jones Industrial Average sank 249.85 points, or 2.5 percent, to 9,712.73 as all 30 of its stocks declined.

Surge of Orders

A surge of erroneous orders triggered computer problems at the open of the New York Stock Exchange, causing quotes on the Big Board and the NYSE Amex to be briefly interrupted. About 12.1 billion shares changed hands on all U.S. exchanges, 27 percent more than the three-month average. The VIX, the benchmark for U.S. stock options that is known as Wall Street’s “fear gauge,” jumped the most in a year on demand for protection from further losses. The VIX added 24 percent to 30.69, the highest since July 8.

The S&P 500 fell 2 percent in October to cap its first monthly decline since February. The Dow was little changed in the month.

Billionaire investor George Soros said the global economic recovery is “liable to run out of steam” and a “double dip” may follow in 2010 or 2011. He spoke in Budapest today, in a lecture organized by the Central European University. Investor Wilbur L. Ross Jr. told Bloomberg Radio the U.S. is in the beginning of a “huge crash in commercial real estate.”

‘Wrong Direction’

“All of the components of real estate value are going in the wrong direction simultaneously,” said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets. “Occupancy rates are going down. Rent rates are going down and the capitalization rate -- the return that investors are demanding to buy a property -- are going up.”

The advance yesterday ended four sessions of losses spurred by growing concern that a rally of as much as 62 percent in the S&P 500 since March 9 had outpaced the outlook for earnings and economic growth. Today’s pullback came as the Commerce Department figures also showed incomes were unchanged in September. The report showed inflation was lower than the Federal Reserve’s long-term projection, indicating policy makers can keep rates low.

Equities also fell today as the consumer confidence data signaled job losses may continue to restrain household spending. The final Michigan index of consumer sentiment decreased to 70.6 from 73.5 in September, which was the highest in more than a year.

Dollar, Yen Gain

The dollar and yen rose against most major currencies on concern central banks around the world may be moving too fast to scale back measures designed to haul their economies out of the recession. Central banks are signaling they are ready to withdraw stimulus measures even as economic reports show the recovery from the worst global recession since World War II may be tepid.

Gauges of energy and raw-materials producers lost at least 3.5 percent. Crude oil for December delivery tumbled 3.6 percent, the most in a month, to $77 a barrel in New York. Copper and gold also fell as the dollar rose, reducing the appeal of commodities as an alternative investment.

Exxon Mobil Corp., the world’s largest company by market value, dropped 3.1 percent to $71.67, while Freeport-McMoRan Copper & Gold Inc., the biggest publicly traded copper producer, retreated 6.2 percent to $73.36.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against six major U.S. trading partners, gained 0.7 percent. The index surged 1.3 percent this week as the S&P 500 lost 4 percent, its steepest decline since May.

Banks Tumble

The S&P 500 Financials Index fell 4.8 percent today for the biggest decline among 10 industries after surging the most since July yesterday. JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. fell at least 4.7 percent.

Citigroup slumped 5.1 percent to $4.09. The New York-based bank may report a $10 billion writedown of deferred tax assets in the fourth quarter, CNBC reported, citing comments on a conference call by Mayo, an analyst with Calyon Securities USA Inc. CNBC later reported that Citigroup has “no idea” how the analyst got the writedown estimate, citing a spokesman.

CIT Group slumped 24 percent to 72 cents. The lender said that it has entered into an agreement with Icahn to support its restructuring plan and secured an incremental $1 billion committed line of credit from Icahn Capital LP to provide supplemental liquidity for CIT as it pursues that plan.

‘Extremely Sensitive’

“The news of Citigroup writedowns and concern about CIT are impacting the overall market,” said David Lutz, managing director of equity trading at Stifel Nicolaus & Co. in Baltimore. “Investors’ perception is extremely sensitive given the impact the group had in the market a year ago.”

Barney Frank, chairman of the U.S. House Financial Services Committee, reversed course and will support requiring financial firms to prepay into a fund the government will use to unwind large firms after they fail. Legislation Frank crafted with the Treasury Department will be amended to create an assessment on institutions with more than $10 billion of assets, he said today in an interview on Bloomberg Television’s “Political Capital with Al Hunt” being broadcast this weekend.

MetLife fell 7.6 percent to $34.03 after posting a third- quarter net loss of $620 million, or 79 cents a share, as revenue declined. Operating earnings, which exclude some investment and derivative results, were 87 cents a share, beating by a penny the average analyst estimate in a Bloomberg survey.

McAfee, NYSE

McAfee Inc. declined 4.3 percent to $41.88 after the second-biggest maker of security software reported third-quarter sales that fell short of some analysts’ estimates.

NYSE Euronext dropped 6.3 percent to $25.85. The world’s largest owner of stock exchanges reported a 28 percent decline in third-quarter profit as revenue from equity trading dropped and European competitors took market share. Excluding some costs, profit was 53 cents a share, beating the 46-cent average of 17 analysts surveyed by Bloomberg.

The market for initial public offerings, hurt by the worst returns in at least 14 years, suffered another setback after AEI pulled its sale. Enron Corp.’s former international energy business postponed its IPO yesterday, citing “market conditions” after underwriters earlier cut it by 58 percent to 21 million shares and lowered the forecast price range.

Genworth Gains

Genworth Financial Inc. added 4.3 percent to $10.62. The life insurer and mortgage guarantor reported its first profit in six quarters and beat analysts’ estimates. Operating income available to common shareholders, which excludes some investment results, was 18 cents a share, beating by 15 cents the average estimate of 16 analysts surveyed by Bloomberg.

The selloff today may have been exacerbated because many mutual funds’ fiscal years end in October, causing managers to sell shares to collect profits or book losses for tax purposes, investors and traders said.

Tax-loss selling could be “weighing on the margin,” Wells Capital’s Paulsen said.

The S&P 500 closed today below its average price over the last 50 days for the second time this week. The index breached its 50-day moving average of 1,052.25. Some technical analysts, who make predictions based on price and volume history, say a move below the 50-day moving average may indicate further losses.

“It’s all about momentum and sustainability,” said Alan Gayle, the Richmond, Virginia-based senior investment strategist at Ridgeworth Investments, which manages $60 billion. “The glass may be half full, but it’s filling slowly. Consumer sentiment is far from strong. Companies have yet to show a sustainable growth plan. I see additional volatility.”

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

Last Updated: October 30, 2009 16:41 EDT