June 20 (Bloomberg) -- U.S. stocks slid to a three-month low, led by consumer and technology companies, as threats of increased violence in the Middle East pushed oil prices higher and analysts said demand for electronics may weaken.

Benchmark indexes extended declines after Standard & Poor's said it may cut credit ratings on General Motors Corp. and Ford Motor Co. because of higher fuel costs, sending GM to its lowest level since 1982. SanDisk Corp. posted its worst drop in eight months on Citigroup Inc.'s prediction that earnings will be less than estimated because of diminished overseas demand. Citigroup led financial shares to a five-year low as UBS AG said the biggest U.S. bank may post a second-quarter loss.

Shares in Europe and Asia also tumbled and the MSCI Emerging Markets Index fell for a third day as Iran's threat to retaliate against a potential attack by Israel weighed on shares. The slide pushed the S&P 500 Index to its third-straight weekly retreat.

``Investors are continuing to lose confidence in the economy,'' said James W. Gaul, a portfolio manager at Boston Advisors LLC in Boston, which manages $2 billion. ``The idea that we're going to end the year up is probably going out the window now.''

The S&P 500 lost 24.90 points, or 1.9 percent, to 1,317.93. The Dow Jones Industrial Average dropped 220.4, or 1.8 percent, to 11,842.69. The Nasdaq Composite Index slid 55.97, or 2.3 percent, to 2,406.09. Six stocks fell for each that rose on the New York Stock Exchange.

Weekly Drop

The S&P 500 tumbled 3.1 percent this week, extending its 2008 slump to more than 10 percent. Financial shares have led the market's retreat this year, dropping 24 percent as a group, as credit-related losses approach $400 billion globally. The Dow declined 3.8 percent this week, and the Nasdaq retreated 2 percent.

More than 2 billion shares changed hands on the NYSE, the most since March 20, as today's expiration of futures and options on indexes and individual stocks spurred trading. So-called quadruple witching occurs once every three months.

The quarterly rebalancing of the S&P 500 after the close of exchanges also boosted volume as investors whose funds mimic the index buy and sell shares to reflect expected adjustments.

GM, Ford Tumble

GM, the biggest automaker, fell the most in the Dow average as 29 of the gauge's 30 stocks retreated. GM slid 6.8 percent to $13.79 and Ford, the second-largest U.S. automaker, lost 8.1 percent to $5.81. Standard & Poor's placed their credit ratings, and those of Chrysler LLC, on CreditWatch with negative implications, citing ``financial damage'' resulting from elevated gas prices. Moody's Investors Service changed Ford's outlook to negative from stable.

Ford said today that automotive losses will worsen as demand for pickups and sport-utility vehicles is ``at one of the lowest levels in decades.'' The finance units of GM and Ford may each have to write down the value of used trucks on lease by more than $1 billion, Lehman Brothers Holdings Inc. analyst Brian Johnson said in a report.

SanDisk tumbled 9.7 percent to $21.16 for the third-biggest drop in the S&P 500. Citigroup analyst Craig Ellis lowered his rating on the largest maker of flash-memory cards to ``hold'' from ``buy.'' He cut his 2008 profit estimate by 12 percent to $1.23 a share and reduced his 2009 estimate by 25 percent to $1.29.

`Demand Erosion'

``Recent card and drive end-demand erosion in Asia, and still-modest embedded handset orders from European companies have gone against our call,'' Ellis wrote in a research note dated yesterday. ``The body of evidence we see no longer argues for putting new money to work in the name and thus we move to the sidelines.''

Technology companies in the S&P 500 retreated 2.5 percent as a group and contributed the most to the index's retreat.

Citigroup, which yesterday said it will post more writedowns from subprime-infected investments, lost 4.3 percent to $19.30. The biggest U.S. bank will probably report a loss in the second quarter, UBS analyst Glenn Schorr said. Schorr reduced his second-quarter estimate to a loss of 40 cents a share from a previous prediction of 37 cents in profit.

Wachovia Corp., the fourth-biggest U.S. bank, fell 1.9 percent to $17.43 after Merrill Lynch & Co. slashed its share- price forecast by 21 percent to $15.

Merrill cut its earnings-per-share estimates for ``large cap regional'' U.S. banks by an average of 22 percent for 2008 and 19 percent for next year.

``Bank stocks now appear to be in capitulation mode,'' New York-based analyst Edward Najarian wrote in a note today.

No Relief

``You don't get relief till you start seeing earnings estimate revisions on the positive side,'' said Michael Mullaney, portfolio manager at Fiduciary Trust Co. in Boston, which manages $10 billion. ``There is no glimpse of any improvement.''

MBIA Inc., the world's largest bond insurer, fell 13 percent to $5.59 for the biggest drop in the S&P 500 after Moody's stripped it and rival Ambac Financial Group Inc. of their Aaa credit ratings. The downgrades followed cuts by Fitch Ratings and S&P, and reduce the value of the more than $2 trillion of debt securities insured by the firms. The cuts may necessitate additional writedowns by the banks that hold the securities, Oppenheimer & Co. analyst Meredith Whitney wrote in a June 9 report.

Fannie Mae lost 4.8 percent to $23.81. Lehman said the biggest U.S. mortgage company may post a second-quarter operating loss of $1.20 per share, wider than the loss of 68 cents a share that Lehman had previously predicted. Its smaller rival Freddie Mac may post a loss of 55 cents a share, wider than the 40 cents previously forecast, Lehman said. Freddie's shares fell 7.7 percent to $21.82.

`Accelerating Pace'

``The housing market continues to deteriorate at an accelerating pace,'' New York-based analysts Bruce W. Harting and Mark C. DeVries wrote in a note to clients today. We expect house prices ``to fall even farther than we believed to 20 percent from the peak,'' they added.

Among smaller financial companies, MF Global Ltd. lost 20 percent to $6.86. Deutsche Bank AG lowered its share-price target for the largest broker of exchange-traded futures contracts 35 percent to $11. MF Global fell 41 percent on June 18 after saying lower interest income and higher expenses will reduce revenue this quarter.

Crude Jumps

Crude oil for July delivery rose $2.69, or 2 percent, to $134.62 a barrel in New York as the weakening dollar enhanced the appeal of commodities as a currency hedge and the New York Times reported that Israel held a rehearsal for a potential bombing attack on nuclear targets in Iran.

Marriott International Inc., the world's largest lodging chain, and Brunswick Corp., which makes recreational boats, led the drop in consumer discretionary companies. The national average price of a gallon of regular unleaded gasoline, derived from crude oil, rose to a record $4.08 this week, according to AAA, the country's largest motoring club.

Marriott sank 5.1 percent to $27.45. Brunswick fell 58 cents, or 4.7 percent, to $11.87. Consumer discretionary companies are the second-worst performing group in the S&P 500 over the past year after financials, with a 24 percent loss.

Huntington Bancshares Inc. added $1.53, or 30 percent, to $6.67 for the biggest gain in the S&P 500. The Ohio-based bank, which had lost 60 percent of its market value this year, said uncollectible loans will be within its second-quarter forecast.

Huntington led regional banks in the S&P 500 to their first advance in four days.

Western Union Co. rose the most since October 2006, adding 8.4 percent to $25.10. The largest money-transfer business raised its long-term profit target and authorized an additional $1 billion stock buyback. Earnings per share will increase as much as 18 percent during the next three to five years, the company said in a statement.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

Last Updated: June 20, 2008 16:26 EDT