May 21 (Bloomberg) -- U.S. stocks declined for a third day, extending a global slump, after jobless claims topped economists’ forecasts and Standard & Poor’s said the U.K. may lose its AAA credit rating. Treasuries and the dollar declined.

Alcoa Inc., Schlumberger Ltd. and Deere & Co. slid at least 4.1 percent on concern a lingering recession will reduce demand for materials, energy and machinery. Regions Financial Corp. tumbled 16 percent after selling shares at a discount to boost capital. The U.K.’s FTSE 100 Index plunged 2.8 percent and gilts slid after S&P lowered its outlook on Britain to “negative” from “stable” as its government finances deteriorate.

The S&P 500, which has rebounded 31 percent from a 12-year low on March 9, slid 1.7 percent to 888.33 at 4:07 p.m. in New York as nine of 10 industry groups declined. The Dow Jones Industrial Average dropped 129.91 points, or 1.5 percent, to 8,292.13. Europe’s Stoxx 600 Index tumbled 2 percent, while the MSCI Asia Pacific Index lost 0.5 percent.

“We need good numbers as opposed to less-bad numbers,” Kevin Rendino, who oversees $10 billion at New York-based BlackRock Inc., the largest publicly traded money manager, said in a Bloomberg Television interview. “When you look at 600,000 of jobless claims, no matter how you slice it, it’s a bad number.”

U.S. stocks erased gains in the final hour of trading yesterday after minutes from the Federal Reserve’s April meeting predicted a deeper recession and American Express Co. said growth won’t return to levels from before the downturn in the economy.

Credit Concern

Treasury 10-year notes rose the most in two weeks, sending yields up 18 basis points to 3.37 percent. The dollar declined to the lowest level against the euro since January.

Bill Gross, co-chief investment officer of Pacific Investment Management Co., said the U.S. will “eventually” lose its AAA credit rating.

“It’s certainly nothing that’s going to happen overnight,” Newport Beach, California-based Gross said in an interview today on Bloomberg TV. “The markets are beginning to anticipate the possibility of” a downgrade to the U.S.’s top rating, he said.

Alcoa Inc., the largest U.S. aluminum producer, lost 4.1 percent to $9.10. Schlumberger, the world’s biggest oilfield contractor, sank 5.6 percent to $51.94. Deere, the largest maker of farm equipment, slid 6.2 percent to $41.57.

Jobless Claims

Initial jobless claims fell by 12,000 to 631,000 in the week ended May 16 from a revised 643,000 the prior week that was higher than initially estimated, the Labor Department said. Economists surveyed by Bloomberg had forecast claims would drop to 625,000, according to the median estimate. The total number of workers receiving benefits rose to a record, a sign the job market continues to weaken even as the economic slump eases.

Regions Financial, Alabama’s biggest bank, tumbled 79 cents to $4.10 for the steepest retreat in the S&P 500. The lender priced an offering of 400 million shares at $4 each, 18 percent lower than yesterday’s closing price. Regulators on May 7 directed Regions to raise $2.5 billion to weather a worsening recession following stress tests of the 19 largest U.S. lenders.

Huntington Bancshares Inc. and Fifth Third Bancorp lost at least 9.8 percent. Still, financial shares in the S&P 500 were the only group among 10 to gain today, adding 0.2 percent.

Comments from former Fed Chairman Alan Greenspan after the close of trading yesterday suggested he sees a bigger capital shortfall in the banking system than reflected in regulators’ stress tests.

‘Mortgage Crisis’

“There is still a very large unfunded capital requirement in the commercial banking system in the United States and that’s got to be funded,” Greenspan said in an interview in Washington. He said “until the price of homes flattens out, we still have a very serious potential mortgage crisis.”

U.K. stocks fell the most in almost two months after S&P said Britain’s top-level AAA debt rating is more likely to be cut as the government’s finances deteriorate. HSBC Holdings Plc and Royal Bank of Scotland Group Plc slid more than 2.4 percent in U.S. trading.

GameStop Corp., the world’s largest video-game retailer, tumbled 15 percent to $22.38 for the second-biggest loss in the S&P 500. The company forecast second-quarter profit that fell short of analysts’ estimates, predicting sales from existing stores will drop as much as 11 percent.

David Rosenberg, former chief North American economist at Merrill Lynch & Co., predicted the S&P 500 may test its 12-year low set in March.

March Lows

“We have to get confirmation the March lows are going to hold,” Rosenberg, now the chief economist and strategist at Gluskin Sheff & Associates Inc. in Toronto, said in an interview with Bloomberg Television. “We are no longer in freefall. I don’t think that’s interesting. The debate is: Are we going to see an economic recovery or not?”

U.S. stocks are at the start of a bull market that may spur an 88 percent advance in the S&P 500 in the next two or three years, Laszlo Birinyi, the founder of Westport, Connecticut- based research and money-management firm Birinyi Associates Inc., said in a Bloomberg interview yesterday.

General Motors Corp. jumped 32 percent to $1.92, the steepest advance in the Dow average. The United Auto Workers said it reached a tentative agreement with the largest U.S. automaker and the U.S. Treasury to modify the automaker’s 2007 labor contract and a health-care trust for union retirees.

Intuit Inc. climbed 8.1 percent to $27.27, the third- steepest advance in the S&P 500. The world’s biggest maker of tax-preparation software reported third-quarter profit that beat analysts’ estimates after more U.S. taxpayers filed returns electronically.

OpenTable Inc., the restaurant-reservation service, soared 59 percent to $31.89 after the company’s initial public offering defied the slowest IPO market in decades. San Francisco-based OpenTable priced its offering at $20 a share last night, in a deal led by Merrill Lynch.

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

Last Updated: May 21, 2009 16:26 EDT