Dec. 15 (Bloomberg) -- U.S. stocks had the biggest weekly decline in a month after a Federal Reserve interest-rate cut and the biggest coordinated effort since 2001 to provide banks with cash failed to assuage concern that the economy will contract.

Washington Mutual Inc. led banks, brokerages and other financial firms to the steepest decline among 10 industries in the Standard & Poor's 500 Index. Circuit City Stores Inc., Sears Holdings Corp. and Amazon.com Inc. retreated on speculation that holiday sales at retailers will fall short of estimates.

Shares declined even after central bankers in North America joined those in Europe to inject money into the financial system and alleviate gridlock in credit markets. Reports that showed accelerating inflation caused concern that the Fed will be unable to cut interest rates more to prop up growth.

``A recession is in the works,'' Andy Engel, who helps run the $1.81 billion Leuthold Core Investment Fund that has outperformed 97 percent of its peers this year, said from Minneapolis. ``You're seeing definitely the impact from the crisis in the credit industry. But we're also seeing that spread into other areas.''

The S&P 500 fell 2.4 percent to 1,467.95 this week. The Dow Jones Industrial Average lost 2.1 percent to 13,339.85, and the Nasdaq Composite Index dropped 2.6 percent to 2,635.74. The Russell 2000 Index of small-company shares declined 4 percent to 753.93.

Yields Increase

Treasury yields gained for a second straight week as traders pared bets that the Fed will cut interest rates next month. The yield on two-year notes added 0.2 point to 3.3 percent, while 10- year note yields rose 0.13 point to 4.23 percent.

The Fed said it will make as much as $24 billion available to the European Central Bank and Swiss National Bank to boost the supply of dollars in Europe. It also plans four auctions to increase cash in the U.S. The Bank of England and Bank of Canada are participating in the plan, which followed rate cuts that failed to calm recession fears.

``The Fed's job is to keep the credit markets and the financial markets calm,'' said Bruce McCain, who helps oversee about $30 billion at Key Private Bank in Cleveland. ``I'd give them a C-plus or a B-minus on that so far.''

Financial shares in the S&P 500 declined 6.1 percent, the most for a week since October. Banks and brokerages have announced more than $70 billion of losses and writedowns amid record high defaults on subprime mortgages.

24 Years

Washington Mutual lost 20 percent, the steepest weekly decline in its 24-year trading history, to $15.15. The biggest U.S. savings and loan said it will write down the value of its home-lending unit by $1.6 billion and slash its dividend 73 percent. Washington Mutual also forecast a fourth-quarter loss and eliminated 6 percent of its workforce.

Countrywide Financial Corp., the biggest U.S. mortgage lender, lost 15 percent to $9.80. Wachovia Corp., the fourth- biggest U.S. bank, slipped 9.6 percent to $39.03.

Citigroup Inc. retreated 11 percent to $30.70. The largest U.S. bank will bail out its seven structured investment vehicles, bringing $49 billion of assets onto its balance sheet in the biggest move yet by a bank to rescue the failing funds.

Sallie Mae also contributed to the retreat in financial shares, tumbling 26 percent to $26.69. The biggest U.S. education lender cut its profit forecast and said J.C. Flowers & Co. refused an offer to reopen acquisition talks.

Retailers

The S&P 500 Retailing Index fell 7.6 percent. Circuit City lost 12 percent to $6.82. Sears retreated 8.5 percent to $105.24. Amazon slipped 5.6 percent to $89.08.

Office Depot Inc. fell 17 percent to $14.44. The world's second-largest office-supplies retailer forecast ``continued erosion'' of sales and earnings in the fourth quarter because of declining demand from corporate customers.

Biogen Idec Inc. lost 22 percent to $58.79. The maker of the multiple sclerosis drug Tysabri said it plans to remain independent. Pfizer Inc., the world's biggest drugmaker, and Sanofi-Aventis SA had been considered potential acquirers.

Goldman Sachs Group Inc., Morgan Stanley, FedEx Corp. and Oracle Corp. are among S&P 500 members scheduled to report quarterly results next week.

Economists estimate that gross domestic product increased at a 4.9 percent annual rate in the third quarter, before turmoil in credit markets worsened, according to the median estimate in a Bloomberg survey. The Commerce Department releases the report on Dec. 20.

To contact the reporter on this story: Nick Baker in New York at nbaker7@bloomberg.net.

Last Updated: December 15, 2007 08:44 EST