Jan. 5 (Bloomberg) -- U.S. stocks fell for the first time in four days on concern that a slump in corporate profits will stretch into 2009, overshadowing speculation the government will revive the economy with tax cuts.

Verizon Communications Inc. tumbled 6.2 percent and AT&T Inc. slid 3.4 percent after Sanford C. Bernstein & Co. said the recession will hurt growth in wireless subscribers. JPMorgan Chase & Co., the largest U.S. bank by market value, slumped 6.7 percent on concern loan defaults will increase. Intercontinental Exchange Inc. plunged 14 percent, the most in a month, as the nation’s second-biggest futures market had its earnings estimate cut by BMO Capital Markets.

The Standard & Poor’s 500 Index slipped 0.5 percent to 927.45, halting its longest stretch of gains since November. The Dow Jones Industrial Average lost 81.8 points, or 0.9 percent, to 8,952.89. The Russell 2000 Index of small U.S. companies retreated 0.2 percent.

“The big unknown is what will happen if you see a lot of Wall Street analysts shaving their estimates in the next few months,” said Madelynn Matlock, a fund manager at Huntington Financial Advisors, which oversees $15 billion in Cincinnati. “We don’t really expect earnings to be good.”

The S&P 500 climbed to a two-month high last week after General Motors Corp. got its first cash infusion from the government, fewer Americans filed jobless claims and rising oil prices lifted energy shares. The benchmark index for U.S. equities posted its steepest annual tumble since the Great Depression in 2008, falling 38 percent amid simultaneous recessions in the U.S., Japan and Europe.

About 10 billion shares changed hands on all U.S. exchanges today, in line with the three-month daily average.

Earnings Slump

Earnings at S&P 500 companies probably fell 12 percent year-over-year last quarter and will drop 11 percent in the current period as the recession curbs consumer demand, according to analyst estimates compiled by Bloomberg. Profits may decline another 6.2 percent in the second quarter, according to the estimates, before growing 12 percent in the third quarter.

Aides said President-elect Barack Obama’s plan to bolster the economy will include hundreds of billions of dollars in tax breaks for individuals and businesses. Obama is asking that tax cuts make up 40 percent of a stimulus package, according to a transition official and Democratic aides. The measure may be worth as much as $775 billion, a Democratic aide said, meaning tax cuts may constitute more than $300 billion.

AT&T, JPMorgan

AT&T slid 99 cents to $28.43. Verizon dropped $2.16 to $32.48. The companies were downgraded by Bernstein analysts, who said the stocks rose too far, too quickly. The S&P 500 Telecommunication Services Index retreated 3.9 percent today, erasing most of last week’s 5.3 percent rally.

JPMorgan fell $2.10 to $29.25, the steepest drop in the Dow. Deutsche Bank AG analyst Mike Mayo expects the bank to earn 18 cents a share for the fourth quarter, a drop of 53 cents from his previous estimate. The number includes a one-time gain of about 19 cents per share from the ending of the New York-based bank’s Paymentech joint venture, he said in a research note yesterday.

Separately, CNBC on-air editor Charlie Gasparino said JPMorgan may report a fourth-quarter loss, citing unidentified analysts.

‘Still in a Bear Market’

“The economic outlook isn’t good and will probably keep weighing down stocks,” said Barry James, president of James Investment Research Inc., which manages $2 billion in Dayton, Ohio. “We’re definitely still in a bear market.”

Telephone and financial companies fell the most among 10 industries in the S&P 500, losing 3.9 percent and 2.5 percent, respectively. S&P 500 energy stocks advanced 1.4 percent for the steepest gain among the 10 groups.

Intercontinental Exchange slid $11.57 to $73, the biggest decline since Dec. 1. ICE, as the exchange is known, said its average daily commission for clearing over-the-counter energy trades fell to $870,934 in December from $912,967 a year ago. BMO Capital Markets analyst Michael Vinciquerra said the rate was far below his projections.

Tyson Foods Inc., the second-largest U.S. chicken producer, dropped 6 percent to $8.79. Chief Executive Officer Dick Bond is resigning as the U.S. meat industry struggles with higher costs and lower demand. Leland Tollett, Tyson’s former chairman and CEO, will fill Bond’s position on an interim basis, effective immediately, the company said.

Energy Gains

The S&P 500 Energy Index advanced for a seventh day, the longest stretch of gains since April. Oil increased 4.2 percent to $48.32 a barrel in New York as Israeli warplanes bombarded Palestinian targets and thousands of soldiers moved into the Gaza Strip late on Jan. 3, spurring concern that supplied from the Middle East may be disruption as the conflict escalates.

Schlumberger Ltd., the world’s largest oilfield-services company, increased 2.6 percent to $46.82. Hess Corp., the fifth- biggest U.S. oil producer, advanced 2.3 percent to $58.56. Apache Corp. rose 4.8 percent to $83.05.

“You’ve got some stocks and sectors that have been completely dismantled for very few logical reasons,” Michael Williams, who helps oversee more than $2 billion as chief executive officer of Genesis Asset Management in New York, told Bloomberg Radio. “The perception that growth is slowing is fine, but the perception that growth is collapsing is probably overdone.”

Apple Rallies

Apple Inc. climbed 4.2 percent to $94.58. Steve Jobs, after months of concern about his health, said he is suffering from a nutritional ailment and plans to remain Apple Inc.’s chief executive officer during his treatment. His decision to talk openly about his health caps months of speculation that he may have to stop running Apple and hand the CEO job to Chief Operating Officer Tim Cook.

Best Buy Co. added 3.4 percent to $30 after Goldman Sachs Group Inc. raised its rating on the largest U.S. electronics retailer to “buy” from “neutral.”

Micron Technology Inc. surged 17 percent to $3.32 for the second steepest gain in the S&P 500. The U.S. maker of computer- memory chips should benefit as Samsung Electronics Co. moves toward raising some chip prices, said analysts at Lazard Capital Markets LLC.

Builders Climb

Homebuilders in the S&P 500 climbed 8.1 percent as a group after spending on U.S. construction projects fell less than half as much as forecast in November. The 0.6 percent decline followed a 0.4 percent drop the prior month that was smaller than previously reported, the Commerce Department said. The median estimate of economists surveyed by Bloomberg News was a 1.4 percent slide.

Pali Research analysts said President-elect Obama’s proposed tax cuts may be “very positive” for homebuilders because of changes in tax rules.

D.R. Horton Inc., the largest U.S. homebuilder, jumped 9 percent to $8. USG Corp., North America’s largest maker of gypsum wallboard, increased 9.7 percent to $9.24.

Concern that global stock losses will deepen remains elevated even after falling from record levels in October and November. The Chicago Board Options Exchange Volatility Index, which measures price swings in the S&P 500, ended 2008 at 40, up 78 percent from a year ago and more than triple the level at the start of 2007. The so-called VIX slipped 0.3 percent to 39.08 today.

Still, Wall Street strategists who told investors to buy stocks in the worst year since 1937 are even more bullish than a year ago, predicting the S&P 500 will rise 17 percent in 2009.

UBS AG, JPMorgan Chase & Co. and Deutsche Bank say the Fed’s decision to slash interest rates to a range as low as zero will help revive the U.S. economy and drive investors back to equities. Cheaper fuel prices and Obama’s stimulus plans will send stocks higher, the strategists said.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

Last Updated: January 5, 2009 16:38 EST