Oct. 10 (Bloomberg) -- U.S. stocks retreated as growing concern that earnings will trail estimates at the largest American companies sent the Dow Jones Industrial Average to its biggest drop in a month.

Alcoa Inc., the first member of the Dow average to report results, declined the most in a week after sales slipped 3.2 percent. Monsanto Co., the largest seed producer, fell after its loss widened on lower-than-expected sales. Boeing Co. posted its steepest tumble since August after saying it needs six more months to finish building its new 787 Dreamliners.

The Standard & Poor's 500 Index lost 2.68, or 0.2 percent, to 1,562.47 after climbing to a record yesterday. The Dow, which also posted an all-time high yesterday, fell 85.84, or 0.6 percent, to 14,078.69. The Nasdaq Composite Index added 7.7, or 0.3 percent, to 2,811.61.

A slowdown in economic expansion may reduce profit growth at S&P 500 companies to 0.7 percent in the third quarter from at least 10 percent in each of the 20 previous quarters, according to a Bloomberg survey.

``It's going to be a below-average quarter for sure,'' said Alan Gayle, who helps manage about $70 billion as senior investment strategist at Trusco Capital Management in Richmond, Virginia. ``We may see a little bit of softness again in the fourth quarter, softer than what the market is expecting right now.''

The S&P 500 and Dow average yesterday rallied to records after minutes from the Federal Reserve allayed investor concerns that the economy is heading for a recession.

Alcoa, Monsanto

Alcoa, whose results signal the start of the earnings season, fell 99 cents, or 2.5 percent, to $38.73. The world's second-largest aluminum company's profit excluding some items trailed analysts' estimates by 1 cent.

Monsanto fell 74 cents to $88.78. Excluding some items, the company lost 18 cents a share in its latest quarter, a wider deficit than the 16-cent loss estimated by analysts in a Bloomberg survey.

Boeing retreated $2.77, or 2.7 percent, to $98.68, the steepest decline in the Dow average. Deliveries of the 787 Dreamliner are now slated to begin in late November or December of 2008, instead of the original target date of May, Boeing said. The first test flight, which was postponed last month, now won't take place until the end of March.

Chevron, International Paper

Chevron Corp., the second biggest U.S. crude producer, dropped 72 cents to $92.08 after saying third-quarter net income was ``significantly below'' the record $5.4 billion the company earned in the April-June period. The company cited a ``sharp decline'' in margins on refined fuels, $700 million in charges related to asset impairments and environmental cleanups, and the absence of a gain from a second-quarter asset sale.

International Paper Co., the world's biggest forest-products company, decreased 88 cents, or 2.4 percent, to $36.18. The company's third-quarter profit missed analysts' estimates because of lower-than-expected land sales.

Applied Materials Inc., the largest maker of semiconductor- production equipment, slid 47 cents to $20.19 after Lehman Brothers Holdings Inc. cut its recommendation on the shares to ``equal weight'' from ``overweight.'' ``We remain concerned about excess memory spending, the commoditization of semiconductors, and potential negative impact of a slowdown in worldwide economic growth,'' the analysts wrote.

PetSmart Inc. fell $1.32 to $31.06. The largest U.S. pet- store chain said third-quarter same-store sales will increase less than it previously forecast. Third-quarter earnings per share will be 17 cents to 20 cents, PetSmart said. Full-year profit will be $2.02 to $2.07 a share, the company said, less than its previous forecast of $2.08 to $2.10.

`See Some Pressure'

``The fourth-quarter earnings season is the difficult one,'' said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh. ``If we really do see the credit market problems and U.S. housing problems causing a downturn in the U.S. economy, the fourth quarter should be the one where we really start to see some pressure.''

A gauge of financial shares fell 1 percent, the steepest drop among 10 industries in the S&P 500. Genworth Financial Inc. lost $1.50, or 4.7 percent, to $30.12 after Banc of America Securities analysts cut their rating on the insurer to ``neutral'' from ``buy'' and lowered their 2007 and 2008 profit estimates, citing the mortgage insurance business.

Financials Slump

Banks also fell after minutes of the Federal Open Market Committee's Sept. 18 meeting showed policy makers avoided foreshadowing the Fed's next move after lowering the benchmark rate. Officials didn't want investors to conclude extra cuts were guaranteed, according to the records, which were released yesterday. Boston Fed President Eric Rosengren said today the retreat from risk in credit markets is unlikely to have a lasting impact on the economy or financial markets.

American International Group Inc. dropped $1.58 to $68.53. The world's largest insurer was rated ``neutral'' by Banc of America analyst Alain Karaoglan. The company's non-U.S. life insurance sales growth ``is likely to be more in line'' with peers, Karaoglan said in a research note.

Costco Wholesale Corp. added $5.82 to $69.13. The largest U.S. warehouse club said fourth-quarter profit increased 4.7 percent as customers bought food and consumer electronics.

Host Hotels

Host Hotels & Resorts Inc., the owner of properties including Marriotts, Westins and Hiltons, said third-quarter profit more than doubled to $97 million on higher demand for rooms. The stock gained 29 cents to $23.40.

In economic data, sales at wholesalers outpaced inventories in August. Stockpiles rose 0.1 percent, less than forecast, after a 0.2 percent increase in July, the Commerce Department said. Sales at wholesalers climbed 0.4 percent after a 0.2 percent gain.

The Russell 2000 Index, a benchmark for companies with a median market value of $686 million, fell 0.1 percent to 845.19. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, lost 0.1 percent to 15,798.23. Based on its decline, the value of stocks decreased by $10.6 billion.

In other markets, the yield on the benchmark 10-year Treasury note decreased less than 1 basis point to 4.64 percent. The dollar fell for a second day against the euro. Crude oil rose $1.04, or 1.3 percent, to settle at $81.30 a barrel in New York on speculation Turkish forces may attack rebel camps in northern Iraq, curtailing oil shipments.

Alcoa Inc. (AA US)
American International Group Inc. (AIG US)
Applied Materials Inc. (AMAT US)
Boeing Co. (BA US)
Chevron Corp. (CVX US)
Costco Wholesale Corp. (COST US)
Genworth Financial Inc. (GNW US)
Host Hotels & Resorts Inc. (HST US)
International Paper Co. (IP US)
Monsanto Co. (MON US)
PetSmart Inc. (PETM US)

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

Last Updated: October 10, 2007 18:16 EDT