Oct. 13 (Bloomberg) -- U.S. stocks fell, pulling benchmark indexes down from a one-year high, as banks slid on Meredith Whitney’s downgrade of Goldman Sachs Group Inc. and insurers dropped as an overhaul of health care progressed in Congress.

Goldman Sachs slipped 1.5 percent as Whitney cut the stock to “neutral” and said she was “far less bullish” on banking shares. UnitedHealth Group Inc. and Aetna Inc. dropped more than 3 percent to lead managed-care companies lower as the Senate Finance Committee approved an $829 billion plan to overhaul the U.S. health system. Johnson & Johnson tumbled 2.4 percent on lower-than-estimated revenue.

The Standard & Poor’s 500 Index lost 0.3 percent to 1,073.19 at 4:06 p.m. in New York after rising for the previous six days, its longest streak of gains since June 2007. The Dow Jones Industrial Average fell 14.74 points, or 0.2 percent, to 9,871.06. The Nasdaq Composite added less than 0.1 percent to 2,139.89 as Cisco Systems Inc.’s purchase of Starent Networks Corp. helped buoy technology shares.

“We’ve had an awfully nice run in the market here, and I think we’re just at a process of digesting some of those gains,” said Joseph Keating, chief investment officer of Raleigh, North Carolina-based RBC Bank, which oversees $3 billion. “There’s some nervousness ahead of the big earnings week we’re having here.”

The S&P 500 and Dow climbed to one-year highs yesterday amid speculation that improving corporate results will extend a seven-month advance in equities. Alcoa Inc. last week began the third-quarter earnings season with an unexpected profit.

Earnings Slump

Companies in the S&P 500, which has rebounded 59 percent from a 12-year low in March, will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, analysts’ estimates compiled by Bloomberg show. Earnings growth is projected to resume in the final three months of the year.

A gauge of six health insurers in the S&P 500 fell 2.5 percent after the Senate Finance Committee cleared the way for a full Senate debate over the health-care overhaul.

Senate Majority Leader Harry Reid will meld the finance panel bill with one approved by the Senate health committee in July. The finance bill includes a new tax on the most-expensive insurance plans, doesn’t require employers to provide coverage to workers, and omits a provision creating a new government insurance program. Nonprofit co-operatives would instead provide competition to the insurance industry.

Insurers Drop

UnitedHealth Group Inc., the largest health insurer by sales, tumbled 3.7 percent to $24.29 and Aetna Inc., the third- biggest, lost 3.3 percent to $25.54. The group of six medical insurers has gained 2.4 percent so far this year, compared with the S&P 500’s 19 percent advance, amid uncertainty about what effects the legislation will have on earnings.

Goldman Sachs, which is scheduled to announce earnings Oct. 15, slid 1.5 percent to $187.23 after Whitney downgraded the bank to “neutral” from “buy.”

Goldman Sachs has surged 32 percent since Whitney, who correctly predicted Citigroup Inc.’s dividend cut in 2007, raised her rating on the bank to “buy” on July 13. She said in a note to clients today that while she remains “fundamentally constructive on Goldman Sachs over the long term, we prefer to invoke a ‘why be greedy’ rationale and lock in profits at these levels.”

‘Fairly Valued’

JPMorgan Chase & Co. fell 0.9 percent and Wells Fargo lost 0.7 percent, helping send financial shares to the steepest decline among 10 industries in the S&P 500. Whitney said she has become less bullish on banks since they are now “at least fairly valued.” The S&P 500 Financials Index has rallied about 150 percent from a 17-year low on March 6. Zions Bancorp, a Utah lender that operates in 10 Western states, rose 6 percent to $18.02 for the biggest gain in the S&P 500. The lender was rated “outperform” in new coverage by Sanford C. Bernstein & Co., which said the company represents “quality in the junk pile.”

Johnson & Johnson, the world’s largest health-products company, lost 2.4 percent to $61.01 even after earnings topped analysts’ estimates. Revenue fell 5.3 percent to $15.1 billion, below the $15.2 billion anticipated by 14 analysts in a survey. Sales of medical devices didn’t rise enough to counter slowing sales of drugs and consumer items.

“The cost-cutting that some of the larger international companies have done will be what preserves and produces the surprises,” said Eric Teal, who helps oversee $5 billion at First Citizens BancShares Inc. in Raleigh, North Carolina. “Long-term organic growth seems to be out a few quarters.”

Life Insurers

Life insurers had the two biggest declines in the S&P 500. Hartford Financial Services Group Inc. and Genworth Financial Inc. declined at least 6.2 percent. Credit Suisse Group AG analyst Thomas Gallagher said following what will likely be “strong results” in the third quarter, the “book value recovery trade will be largely over for the life insurance sector.”

The bank cut MetLife Inc. and Ameriprise Financial Inc. to “neutral” from “outperform,” sending shares of both down more than 2.7 percent.

Bank of America Corp. lost 1.2 percent to $17.81. The largest U.S. lender by assets failed to persuade a Delaware judge to dismiss a shareholder suit challenging the fairness of its $33 billion buyout in January of Merrill Lynch & Co.

Newmont Mining Corp., the largest U.S. gold producer, gained 2.6 percent to $47.68 as gold rose to a record of $1,069.70 an ounce in New York. Barrick Gold Corp. climbed 1.4 percent to $39.90.

M&A Watch

Starent jumped 17 percent to $33.91. The company that Cisco agreed to acquire makes equipment to help wireless carriers understand the kind of traffic that’s crossing their networks, enabling speedy routing of information to mobile devices such as the iPhone and BlackBerry. Cisco added 0.5 percent to $23.89.

Mergers and acquisitions among U.S. companies are poised to rise, according to Goldman Sachs, which said shares are cheap and executives have cash.

While the steepest rally in the S&P 500 in seven decades pushed the price-earnings ratio for companies in the gauge to 20.3 based on reported operating profits, the highest level since 2004, Goldman Sachs says most stocks remain cheap relative to their valuations in the last 10 years.

Allianz SE, Europe’s biggest insurer, expects stocks to fall because the economic recovery is lagging behind the market’s rally over the past seven months.

“The market rally right now is -- my personal view is -- way ahead of real-life developments,” Paul Achleitner, head of finance at Munich-based Allianz, said yesterday in an interview at Bloomberg headquarters in New York. “The expectation level is so high, you’re going to have the risk that there’s going to be a discrepancy in expectation” and economic data, he said.

To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net.

Last Updated: October 13, 2009 16:31 EDT