U.S. stocks declined, wiping out a 0.4 percent advance in the Standard & Poor's 500 Index, as investor speculated the economy isn't growing fast enough to shield banks from losses on commercial real estate.

Financial shares in the S&P 500 retreated 1.6 percent, as Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM) lost more than 1 percent after Federal Reserve Chairman Ben S. Bernanke said the U.S. faces "formidable headwinds." Exxon Mobil Corp. (XOM) fell 0.7 percent as crude slumped 2.1 percent for a fourth day of declines. The dollar strengthened to the highest level against the European currency in a month, pushing down commodity shares. S&P 500 fell 0.3 percent to 1,103.25 at 4:04 p.m. in New York. Six stocks declined for every five that rose on the New York Stock Exchange. The Nasdaq Composite Index decreased 4.74 points, or 0.2 percent, to 2,189.61. The Dow Jones Industrial Average added 1.21 points to 10,390.11, helped by gains in Boeing Co. (BA) and Verizon Communications Inc. (VZ).

"We're in a precarious position because we've had so much strength in so many sectors, some of which has been rational and some of which has been slightly irrational," said Liam Dalton, who oversees about $1.4 billion as the New York-based chief executive officer of Axiom Capital Management. "But we're out of the phase where the market dynamic is strong on the upside."

Steepest Rally The S&P 500 has surged 63 percent since March 9, the steepest advance since the Great Depression, spurred by record-low interest rates and $12 trillion in spending by governments worldwide. After the 10 industry groups in the index posted gains ranging between 28 percent and 134 percent since March, the measure was valued at 22.2 times the reported operating earnings at its companies from the past year, the most expensive level since 2002, according to data compiled by Bloomberg.

Bernanke said the U.S. economy faces "formidable headwinds," including a weak labor market and tight credit that are likely to limit the expansion. He spoke at a meeting of the Washington Economic Club. Advances in the S&P 500 have ended this month when the index approached the 1,110 level, the highest close in more than a year reached on Nov. 25, said Scott Tapley, who helps oversee $2.5 billion at 1st Source Investment Advisors Inc. in South Bend, Indiana. The S&P 500 traded as high as 1,110.72 today.

"We walked our way up to that level again and then when Bernanke got done talking, we didn't go through it," Tapley said. "Since we're not going up, we've got to go down. It seems to me like it's technical-driven."

Financials Index The S&P 500 Financials Index retreated 1.6 percent, the most among 10 industries. Wells Fargo lost 2.2 percent to $26.36. JPMorgan fell 1.2 percent to $41.25. Bank of America Corp. (BAC) slumped 2.4 percent to $15.89.

As the U.S. economy pulls out of a recession and the biggest banks return to profitability, mounting defaults on commercial property may keep regional lenders from repaying bailout funds until at least 2011.

Unpaid loans on malls, hotels, apartments and home developments stood at a 16-year high of 3.4 percent in the third quarter and may reach 5.3 percent in two years, according to Real Estate Econometrics LLC, a property research firm in New York. That's a bigger threat to regional banks, which are almost four times more concentrated in commercial property loans than the nation's biggest lenders, according to data compiled by Bloomberg on bailout recipients.

Delinquencies on commercial mortgage-backed securities increased to a record in the third quarter. The percentage of CMBS loans at least 30 days past due rose to 4.06 percent from 1.17 percent a year earlier, the Mortgage Bankers Association said today.

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