May 7 (Bloomberg) -- U.S. stocks declined the most in a month, led by financial shares, on concern new disclosure requirements for investment banks will limit their profits.

Merrill Lynch & Co. and Lehman Brothers Holdings Inc. sent brokerages and lenders to their biggest tumble since March after the Securities and Exchange Commission said it will require Wall Street firms to disclose capital and liquidity levels. Fourteen of 15 homebuilders in Standard & Poor's indexes fell on a National Association of Realtors report that fewer Americans bought previously owned homes in March. United Parcel Service Inc. led a drop in all 10 transportation companies in the S&P 500 as oil climbed to a record above $123 a barrel.

The S&P 500 slumped 25.69 points, or 1.8 percent, to 1,392.57. The Dow Jones Industrial Average slid 206.48, or 1.6 percent, to 12,814.35. The Nasdaq Composite Index decreased 44.82, or 1.8 percent, to 2,438.49. Five stocks fell for each that rose on the New York Stock Exchange, with losses accelerating after the SEC's announcement.

``The market is obviously worried about what will be disclosed,'' said Janna Sampson, co-chief investment officer at Lisle, Illinois-based Oakbrook Investments LLC, which oversees about $1.4 billion. ``From an investor's perspective, you want to know the firm you are invested in has a strong capital standing. Why these firms wouldn't disclose this data is a mystery.''

All 10 industry groups in the S&P 500 retreated, erasing the index's gain from yesterday and extending its yearly loss to 5.2 percent. Financial companies slumped the most as concern the Federal Reserve may raise interest rates also weighed on the group. Fed Bank of Kansas City President Thomas Hoenig said in a Denver speech yesterday that ``serious'' inflation pressures may compel the central bank to increase borrowing costs.

`Lessons Learned'

Merrill, the largest U.S. brokerage, slumped 5.6 percent to $48.48 for the steepest drop since March 27. Lehman, the fourth- largest U.S. investment bank, tumbled 5.8 percent to $43.64. Financial shares in the S&P 500 lost 3.7 percent, the most in two months.

The SEC requirement comes after speculation about a cash shortage at Bear Stearns Cos. triggered a run on the firm.

``One of the lessons learned from the Bear Stearns experience is that in a crisis of confidence, there is great need for reliable, current information about capital and liquidity,'' SEC Chairman Christopher Cox told reporters in Washington today. ``Making that information public can certainly help.''

Homebuilders in S&P indexes retreated 4.3 percent as a group after pending sales of existing homes fell for the fourth time in five months, signaling no end in sight to the housing recession. D.R. Horton Inc. lost 6.6 percent to $15.74. Lennar Corp. fell 5.3 percent to $18.92.

Fannie Slumps

Fannie Mae fell 5.7 percent to $29.05. The biggest U.S. mortgage-finance company plans to raise $6 billion of capital in share sales after the market closes today. Fannie Mae is marketing about $2 billion each of common and convertible preferred shares, and also plans to sell non-convertible preferred shares.

Gold, silver and other metal prices fell, hurting shares of producers including Newmont Mining Corp. The world's third- largest gold producer fell 1.6 percent to $45.22.

Crude oil rose 1.4 percent to a $123.53 a barrel in New York, sending transportation companies lower. UPS, the world's largest package delivery company, retreated 2.4 percent to $71.58. Smaller rival FedEx tumbled 4 percent to $93.75.

Windfall Tax

Energy shares still retreated after Senate Democrats unveiled a legislative plan to harness record oil and gas prices, including a limited halt to Strategic Petroleum Reserve contributions and a so-called windfall tax on oil companies such as Exxon Mobil Corp. Exxon, the biggest U.S. oil company, lost 1.4 percent to $88.82.

The Fed's Hoenig said yesterday borrowing costs are low enough that, when combined with tax rebates passed by Congress, the economy should pick up in the second half.

``The Fed is done lowering rates and may start to raise rates sooner than people expect,'' said Mike Blatt, an Elmira, New York-based asset manager at Chemung Canal Trust Co., which oversees $1.8 billion. ``That'll be supportive for the dollar and impact currency translation earnings for some of the international companies.''

Dollar Rally

The U.S. dollar index rose to a two-month high of 73.50. Companies from Boeing Co. to Philip Morris International Inc. have posted higher-than-estimated profits in the past month because the U.S. currency's slide has boosted the value of overseas sales.

Boeing fell 1.4 percent to $84.55. Philip Morris slipped 0.4 percent to $51.69.

Walt Disney Co., the largest operator of theme parks, rose to a six-month high after increased visits to its resorts generated higher second-quarter profit than analysts projected. Disney added 2.9 percent to $34.70.

``The stronger news from Disney last night bodes well for many U.S. companies as it benefited from a stable U.S. consumer business,'' said Steven Neimeth, leader of a group that manages $800 million at AIG SunAmerica Asset Management Corp. in Jersey City, New Jersey.

Titanium Metals Corp. rose 12 percent to $17.67, the most since July 2006 and the biggest gain in the S&P 500. The maker of specialty metals for jet planes reported first-quarter sales of $293.7 million, topping the $287 million average of analysts' estimates compiled by Bloomberg.

DirecTV Group Inc. rose 4.7 percent to $27.01 for the second-biggest increase in the S&P 500. The largest U.S. satellite-television provider posted a 10 percent increase in first-quarter profit and said it will sell as much as $2.5 billion in debt to fund a share buyback.

Pitney Bowes

Pitney Bowes Inc. climbed 4.1 percent to $38.16, the most since Feb. 1 and the third-biggest advance in the S&P 500. The world's largest maker of postal meters said first-quarter profit excluding some costs was 66 cents a share, topping the average analyst estimate by 2.6 percent.

Cognizant Technology Solutions Corp. fell 10 percent to $30.21, the most in the S&P 500. The computer-services provider to companies such as Aetna Inc. forecast sales and profit that fell short of analysts' estimates. Second-quarter earnings will be 34 cents to 35 cents a share on sales of least $680 million, compared with average estimates of 36 cents on revenue of $710.6 million in a Bloomberg survey.

Cisco Systems Inc., the world's biggest maker of networking equipment, failed to rally after profit and sales beat estimates and Chief Executive Officer John Chambers said revenue will meet projections this year. Cisco lost 2.1 percent to $25.78.

About 1.25 billion shares changed hands on the NYSE, 16 percent less than the three-month daily average.

The Russell 2000 Index, a benchmark for companies with a median market value 95 percent smaller than the S&P 500's, dropped 1.9 percent to 716.21. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, fell 1.7 percent to 14,066.66. Based on its decline, the value of stocks decreased by $302.3 billion.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.

Last Updated: May 7, 2008 16:49 EDT