Feb. 8 (Bloomberg) -- U.S. banks and homebuilders pulled the Standard & Poor's 500 Index down from its highest since 2000 on signs of more fallout from last year's housing slump.

Citigroup Inc., the largest bank, and Countrywide Financial Corp., the biggest U.S. mortgage lender, slumped, causing financial shares to tumble from a record. Homebuilders fell for a fourth day on a plunge in orders at Toll Brothers Inc.

The declines signal concern the housing market isn't mending as quickly as investors had expected and may be a drag on bank profits. New Century Financial Corp., the second-largest home lender to the riskiest borrowers, fell the most since 1998 after saying it will probably post a loss for last quarter.

``Any weakness for our financial institutions could create a high degree of concern and risk,'' said James Thorne, who oversees $13 billion as chief capital market strategist at MTB Investment Advisors in Baltimore. ``There's a level of complacency in the market that we have to get out.''

The S&P 500 slid 3.50, or 0.2 percent, to 1446.52 at 1:31 p.m. in New York. The Dow Jones Industrial Average fell 49.27, or 0.4 percent, to 12,617.60. The Nasdaq Composite Index lost 3.05, or 0.1 percent, to 2487.45.

Technology stocks rallied yesterday, pushing the S&P 500 to a six-year high and the Nasdaq to its eighth gain in nine days, after Cisco Systems Inc. forecast sales that beat analysts' estimates.

Today, about seven stocks declined fell for every five that gained on the New York Stock Exchange. Some 948 million shares changed hands on the Big Board, 5.7 percent less than the same time a week ago.

Financials

Citigroup dropped 59 cents to $54.36 while Countrywide fell $1.15 to $43.59. JPMorgan Chase & Co. lost 53 cents to $50.68.

London-based HSBC Holdings Plc said bad home loans in the U.S. increased and it set aside 20 percent more than analysts estimated to cover them. Europe's biggest bank has told shareholders three times since November that bad loans in the U.S. are hampering revenue growth.

``This is a shot across the bow,'' said MTB's Thorne. ``Is this the first of many or just a one off? We don't know yet.''

A measure of financial companies was the biggest drag on the S&P 500 among 10 industry groups, sliding 0.4 percent.

New Century tumbled $8.67, or 29 percent, to $21.49. The lender will restate 2006 results after not setting aside enough for repurchases of so-called sub-prime loans it had sold. The stock slid the most since October 1998, when the Russian debt crisis was cutting off sales of such loans in securities.

Toll Brothers retreated $1.01 to $33.42 after reporting a 33 percent plunge in first-quarter orders. The builder also said expenses to reduce land holdings may almost triple.

All 16 members of an S&P homebuilders index declined.

Waste Management

Elsewhere, Waste Management Inc. fell $3.33, or 8.7 percent, to $35.08, the most in five years and the worst performance in the S&P 500. The largest U.S. trash hauler said fourth-quarter earnings tumbled 15 percent as it shed some customers to focus on more profitable businesses.

Waste Management led a decline among industrial shares, which fell 0.8 percent for the steepest drop among 10 industry groups.

For the 351 members of the S&P 500 that reported fourth- quarter results, average earnings growth was 9.2 percent, according to data compiled by Bloomberg.

If earnings expansion remained at that level, it would end a 13-quarter streak of profit growth above 10 percent, which matched the longest such streak since 1950, according to Thomson Financial.

Aetna, Level 3

Aetna Inc. lost $1.73 to $42.27. The nation's third-biggest health insurer by revenue said fourth-quarter earnings increased 4.3 percent as the company added services for small employers and individuals.

Level 3 Communications Inc. slumped 34 cents to $5.18. The long-distance phone and data network operator posted a wider fourth-quarter loss because of higher interest expenses from acquisitions. The loss increased to $237 million, or 20 cents a share, from $169 million, or 24 cents, a year earlier.

Qwest Communications International Inc. retreated 7 cents to $8.18. Quarterly profit at the fourth-largest U.S. phone company beat the average estimate of analysts surveyed by Bloomberg as the company attracted more high-speed Internet subscribers.

Thermo Fisher Scientific Inc. declined 62 cents to $49.09. The world's largest supplier of medical laboratory equipment said fourth-quarter earnings declined 55 percent on costs related to the acquisition that expanded the company.

Altria Group Inc. fell 58 cents to $85.40. The parent of the world's largest cigarette maker may face more competition after Imperial Tobacco Group Plc, the U.K. maker of Lambert & Butler, agreed to buy Commonwealth Brands for $1.9 billion to enter the U.S. discount cigarette market.

January Sales

Retailers Gap Inc. and Federated Department Stores Inc. rallied after consumers spent gift cards and bought winter clothes amid the frigid weather, spurring January sales.

Gap said sales last month were unchanged, versus the 7.6 percent drop analysts had expected. Its shares rose 54 cents to $19.79.

Federated, which owns Bloomingdale's and Macy's, reported an 8.6 percent jump in sales, almost double the average analyst estimate. Its shares advanced $1.91 to $43.23.

Hewlett-Packard Co. added 22 cents to $42.52. The world's largest personal computer and printer maker was added to Goldman, Sachs & Co.'s ``conviction buy list.''

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

Last Updated: February 8, 2007 13:33 EST