Sept. 25 (Bloomberg) -- Most U.S. stocks dropped for a second day after Target Corp. and Lowe's Cos. reduced forecasts, heightening concern that the housing slump has slowed consumer spending.

Target, the second-largest U.S. discount chain, retreated the most in six weeks after slashing its projection for September sales. Lowe's, the second-biggest home-improvement retailer, posted its steepest decline since 2003 after saying earnings this year may miss its prior forecast. Lennar Corp., the largest U.S. homebuilder, sank to a four-year low on the worst quarterly loss in its history.

The Standard & Poor's 500 Index slipped 0.52 to 1,517.21. The Dow Jones Industrial Average increased 19.59, or 0.1 percent, to 13,778.65. The Nasdaq Composite Index added 15.5, or 0.6 percent, to 2,683.45, helped by a 1.7 percent rise in Microsoft Corp. About eight stocks dropped for every five that rose on the New York Stock Exchange.

Most stocks fell for three of the last four days, pushed down by concern the Federal Reserve's interest rate cut may have come too late to keep the economy from stagnating. Reports today also showed consumer confidence and home sales slipped.

``The housing numbers and the retail communications from Target are weighing on the psychology of the market,'' said Scott Richter, who helps manage $21 billion at Fifth Third Asset Management in Cleveland. ``The consumer is getting pressured right now and that works right down the line to retail sales.''

The market's decline was limited after investors increased bets that the Fed will continue reducing interest rates this year to revive economic growth.

Target, Lowe's

Target dropped $2.95, or 4.6 percent, to $61.35. Comparable- store sales will increase 1.5 percent to 2.5 percent for the five weeks through Oct. 6, the company said. Target previously forecast a September gain of 4 percent to 6 percent.

Lowe's lost $2.04, or 6.7 percent, to $28.51. Profit this year may be at the low end or slightly below an Aug. 20 forecast of $1.97 to $2.01 a share, the company said. Eighteen analysts surveyed by Bloomberg estimated an average profit of $2.01.

Retailers accounted for seven of the top 10 percentage declines in the S&P 500 after the Conference Board said its gauge of consumer confidence fell to the lowest level in almost two years and the International Council of Shopping Centers Inc. reduced its forecast for September retail sales growth.

Home Depot Inc., the largest home-improvement chain, slipped 80 cents, or 2.4 percent, to $33.08 for the steepest decline in the Dow average. Wal-Mart Stores Inc., the biggest retailer, dropped 81 cents to $43.16. Bed Bath & Beyond Inc., which reports quarterly results tomorrow, fell $1.47 to $33.20.

Lennar Earnings

Lennar lost 96 cents, or 4 percent, to $23.22. The largest U.S. homebuilder reported a fiscal third-quarter loss of $513.9 million as reduced demand for housing forced the company to write down the value of some real estate. Revenue slid 44 percent to $2.34 billion.

Home prices in 20 U.S. metropolitan areas fell 3.9 percent in the 12 months through July, the most on record. The S&P/Case- Shiller home-price index declined in January for the first time since the group started the measure in 2001 and has receded every month since then.

Sales of previously owned U.S. homes slipped 4.3 percent in August to an annual rate of 5.5 million, a five-year low, the National Association of Realtors said.

Builders also fell after UBS AG analysts wrote in a note dated Sept. 24 that the housing market probably won't ``trough'' until 2009. The brokerage started coverage of the U.S. homebuilding sector with a ``pessimistic'' outlook.

Pulte Homes Inc. lost 46 cents to $14.64. KB Home, which reports earnings on Sept. 27, decreased 65 cents to $25.09. A gauge of homebuilders in S&P indexes fell 2.4 percent to the lowest since May 2003.

`Bad News'

``The numbers here are just not getting better anytime soon,'' said Peter Schofield, who helps manage about $1 billion at Knott Capital Management in Exton, Pennsylvania. ``There's too much supply right now relative to demand. We think bad news is still in the offing.''

General Motors Corp., the biggest U.S. automaker, declined 32 cents to $34.42. Ron Gettelfinger, president of the United Auto Workers union, said proposals for a retiree health-care trust are ``off the table'' in negotiations with GM.

Gettelfinger, who spoke in an interview on Detroit radio station WJR-AM, didn't say whether the proposal was withdrawn permanently or temporarily. GM's U.S. factory employees staged their first nationwide strike in 37 years yesterday.

Energy Slump

Energy companies in the S&P 500 retreated 0.9 percent as a group. Crude oil fell for a third day as production resumed after a storm passed through the Gulf of Mexico and Saudi Arabia's oil minister said energy markets are ``in turmoil.'' The contract for November delivery slid 1.8 percent to $79.53 a barrel in New York.

Chevron Corp., the second-biggest U.S. oil company, lost $2.47 to $91.88. ConocoPhillips, the third-largest, declined $1.89 to $87.29.

Traders increased wagers that the Fed will lower its target rate for overnight loans between banks to 4.25 percent by the end of the year. The odds a quarter-percentage point rate cut at the central bank's Oct. 31 policy meeting are 88 percent, up from 72 percent yesterday, futures contracts show. Futures are also pricing in a 74 percent chance of another quarter-percentage point cut at the Dec. 11 meeting.

U.S. stocks posted the steepest one-day rally in four years on Sept. 18 after Fed policy makers led by Chairman Ben S. Bernanke cut their benchmark rate by half a percentage point to 4.75 percent.

Some 1.3 billion shares changed hands on the Big Board today, 21 percent less than the three-month daily average.

Technology Rally

Technology shares in the S&P 500 rallied 1 percent as a group for the top gain among 10 industries. Some analysts said the stocks climbed as investors sought companies that are less vulnerable to a slowing U.S. economy.

``Technology appears to be the new safe haven, so going forward that may be the place to put your money,'' said David Spika, who helps oversee about $6.5 billion as investment strategist at Westwood Holdings Group Inc. in Dallas. ``Companies that have foreign exposure are likely to perform the best.''

About 55 percent of the revenue at companies in the S&P 500 Information Technology Index came from foreign sales last year, according to data compiled by Howard Silverblatt, senior index analyst at S&P. That compares with 44 percent of sales for the broader S&P 500.

`Halo 3'

Microsoft, the world's biggest software maker, climbed 48 cents to $29.56. ``Halo 3,'' the latest version of Microsoft's best-selling Xbox video-game series, went on sale today. The game may surpass $170 million in one-day U.S. sales, according to Jeff Bell, vice president for Xbox marketing.

At least 480,000 people have already played ``Halo 3'' online, according to the Web site of Bungie, the Microsoft studio that makes the game.

Merck & Co., the drugmaker that's fighting more than 27,000 lawsuits over its Vioxx painkiller, gained 60 cents to $52.28 after the U.S. Supreme Court said it will consider putting new limits on patient lawsuits over federally approved drugs.

Boeing Co., the world's second-largest commercial planemaker, added $1.88 to $104.93. Air Arabia, the discount airline based in the United Arab Emirates, said it's in talks with Boeing and Airbus SAS about buying as many as 40 short-haul planes to expand its fleet.

In other markets, the yield on the benchmark 10-year Treasury note fell almost 0.01 percentage point to 4.62 percent. The dollar dropped to a record against the euro for a fourth day on growing expectations the Fed will cut borrowing costs for a second time this year.

The Russell 2000 Index, a benchmark for companies with a median market value of $662 million, fell 0.4 percent to 803. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, lost 0.1 percent to 15,254.08. Based on its decline, the value of stocks decreased by $11 billion.

Bed Bath & Beyond Inc. (BBBY US)
Boeing Co. (BA US)
Chevron Corp. (CVX US)
ConocoPhillips (COP US)
General Motors Corp. (GM US)
Home Depot Inc. (HD US)
KB Home (KBH US)
Lennar Corp. (LEN US)
Lowe's Cos. (LOW US)
Merck & Co. (MRK US)
Microsoft Corp. (MSFT US)
Pulte Homes Inc. (PHM US)
Target Corp. (TGT US)
Wal-Mart Stores Inc. (WMT US)

To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net.

Last Updated: September 25, 2007 17:31 EDT