May 23 (Bloomberg) -- U.S. stocks fell for the first time in four days after Analog Devices Inc. said profit may trail analysts' estimates and former Federal Reserve Chairman Alan Greenspan warned the stock market in China faces a ``dramatic contraction.''

McDonald's Corp., Intel Corp. and International Business Machines Corp. posted the steepest declines in the Dow Jones Industrial Average, while technology shares led the Standard & Poor's 500 Index's retreat. Analog Devices, a maker of semiconductors used in everything from mobile phones to cars, dropped the most in nine months.

Shares erased early gains that sent the S&P 500 above its 2000 record for a third day. Greenspan, speaking by satellite to a conference in Madrid, said a rally that boosted China's benchmark CSI 300 Index by 90 percent this year is unsustainable.

``Investors are probably recalling how China affected the Asian markets, leading to a global sell-off,'' said Frederic Dickson, chief market strategist at D.A. Davidson & Co., which manages $17 billion in Great Falls, Montana. More than $3.2 trillion of global stock market value was erased after China toughened laws against speculation on Feb. 27.

The Dow average dropped 14.30, or 0.1 percent, to 13,525.65 after earlier reaching a record. The S&P 500 lost 1.84, or 0.1 percent, to 1522.28 after rising to as high as 1532.43, five points above its March 2000 record close. The Nasdaq Composite Index declined 10.97, or 0.4 percent, to 2577.05.

Analog Devices

Analog Devices fell $4.03, or 10 percent, to $36.39 for the steepest drop in the S&P 500. The chipmaker said profit this quarter will be 33 cents to 37 cents a share. That's less than the 41-cent average analyst estimate compiled by Bloomberg.

Technology shares in the S&P 500 dropped 0.8 percent and were the biggest drag on the index.

Greenspan's comments came as the CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, rose to a record 3938.95 today. The index more than doubled last year as investors bet corporate profits would be boosted by the world's fastest-growing major economy.

``The strength of the Chinese market has kind of spilled over into the positive sentiment here in the U.S,'' said Michael James, senior equity trader at Wedbush Morgan Securities in Los Angeles. ``To have someone like Greenspan calling for a dramatic contraction in the Chinese markets might have made a few people a little nervous.''

About three stocks fell for every two that gained on the New York Stock Exchange. Some 1.6 billion shares traded hands, 1.1 percent less than the three-month average.

Blue Chip Declines

McDonald's, the world's largest restaurant chain, fell 93 cents, or 1.8 percent, to $51.57 for the steepest drop in the Dow average. Intel, the biggest semiconductor maker, slipped 32 cents to $22.67. IBM, the largest provider of computer services, declined $1.12 to $105.58.

A measure of utility shares fell 1.2 percent after Treasury yields rose to the highest level since January. Higher bond yields make dividend-paying stocks less attractive. Utilities shares have an average dividend yield of 2.8 percent compared with 1.8 percent for the S&P 500.

Public Service Enterprise Group Inc., a New Jersey utility owner, fell $2.78 to $88.41. Consolidated Edison Inc., owner of New York City's biggest utility, lost 97 cents to $49.73.

Traders have reduced bets the Federal Reserve will cut interest rates this year. Fed funds futures today showed about a 19 percent chance of a rate cut by September, compared with 41 percent about a week ago.

Richmond Fed President Jeffrey Lacker said yesterday it's the central bank's responsibility to curb inflation and it would be a mistake to rely on slower growth to stem price increases.

Early Rally

The stock market's early gains today were fueled by earnings that topped analysts' forecasts and takeover speculation.

Target Corp. rose 56 cents to $58.60 after the second- largest U.S. discount retailer said net income was 75 cents a share, topping the 71-cent average analyst estimate compiled by Bloomberg. Sales at stores open at least a year rose 4.3 percent, helped by demand for generic prescription drugs and electronics.

Medtronic Inc. climbed $2.18, or 4.3 percent, to $52.98. The biggest maker of electronic heart devices said fourth-quarter profit rose 9.7 percent on sales of defibrillators, the company's top product. Profit excluding special items of 66 cents a share beat the 62-cent average estimate of 20 analysts surveyed by Bloomberg.

Alcoa Climbs

Alcoa Inc. advanced $1.42, or 3.7 percent, to $40.37 for the best gain in the Dow industrials. Alcan Inc., Canada's biggest aluminum producer, urged shareholders to reject a $27.4 billion bid from Alcoa and said the board of directors has held talks with other potential suitors.

Alcoa Chief Executive Officer Alain Belda's motivation to complete a deal was ``much higher than Alcan's and likely driven by Alcoa's concern, expressed repeatedly by Mr. Belda in private discussions, that Alcoa was itself a potential target of an unsolicited takeover bid,'' Alcan said yesterday in a government filing.

Alcan said Alcoa's $74.60-a-share offer is ``inadequate.'' Alcan has started ``early-stage'' talks with BHP Billiton Ltd. to help fend off Alcoa, the Globe and Mail reported on its Web site, citing unidentified people. Alcan shares rose $4.86 to $85.89.

BHP Billiton Chief Executive Officer Charles Goodyear said his company is always looking at potential acquisitions. Stefano Bertolli, a spokesman for Alcan's Australian unit, declined to comment on the report.

Energy Shares

Energy shares in the S&P 500 climbed 0.3 percent as a group after oil prices climbed on skepticism that U.S. refineries can produce enough gasoline to keep up with increasing consumption of the motor fuel.

ConocoPhillips, the third-biggest U.S. oil producer, led the advance after Sanford C. Bernstein & Co. lifted its rating on the shares to ``outperform'' from ``market perform.'' The stock gained 86 cents to $76.71.

Exxon Mobil Corp., the world's largest publicly traded oil company, added 22 cents to $82.99.

Investors also looked ahead to a durable goods report due tomorrow. Economists surveyed by Bloomberg say orders probably rose for a third month in April. The last time the Commerce Department reported as many consecutive gains in durable-goods orders was from April through June 2005.

The Russell 2000 Index, a benchmark for companies with a media market value of $664 million, lost 0.4 percent to 836.54. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, fell 0.2 percent to 15,348.10. Based on its decline, the value of stocks decreased by $30.9 billion.

Alcan Inc. (AL US)
Alcoa Inc. (AA US)
Analog Devices Inc. (ADI US)
ConocoPhillips (COP US)
Consolidated Edison Inc. (ED US)
Exxon Mobil Corp. (XOM US)
Intel Corp. (INTC US)
International Business Machines Corp. (IBM US)
McDonald's Corp. (MCD US)
Medtronic Inc. (MDT US)
Public Service Enterprise Group Inc. (PEG US)
Target Corp. (TGT US)

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

Last Updated: May 23, 2007 17:13 EDT