Stocks Fall, Goldman Predicts Banks Need More Capital

U.S. stocks fell for the first time in four days yesterday as Goldman Sachs Group Inc. predicted banks will have to raise $65 billion in new capital to cover losses and housing starts and industrial production trailed forecasts.

Zions Bancorporation tumbled the most in eight years after the Salt Lake City-based lender projected more losses from bad loans and Goldman said it remains "cautious" on regional banks. All 23 companies in the Standard & Poor's 500 Banks Index declined as the group slumped to its lowest level since 1996. Boeing Co. and Deere & Co. retreated on the unexpected drop in factory output, while Lennar Corp. led builders lower on a report showing new-home starts slumped to a 17-year low.

The S&P 500 lost 9.21 points, or 0.7%, to 1,350.93. The Dow Jones Industrial Average declined 108.78, or 0.9%, to 12,160.3. The Nasdaq Composite Index slid 17.05, or 0.7%, to 2,457.73. Two stocks decreased for each that advanced on the New York Stock Exchange.

"The growth in the market is going to be in companies that increase the supply of materials and commodities, and the area that's going to struggle is going to be financials because they're going to go through this long period of deleveraging," a portfolio manager at Provident Investment Counsel in Pasadena, California, Richard Campagna, said. "I don't see that changing for the next bunch of years."

Stocks opened higher after better-than-estimated earnings at Goldman, the world's biggest securities firm, spurred speculation that the worst losses at financial companies are over. Today's retreat snapped a three day streak of gains for the S&P 500, its longest of the month.