American stocks tumbled the most in 11 months after service industries contracted at the fastest pace since 2001, reinforcing concern the economy is in a recession. Exxon Mobil Corp. and General Electric Co. led declines in New York trading and all 10 industry groups in the S&P 500 retreated after the Institute for Supply Management’s index, which reflects almost 90% of the economy, fell more than forecast. Citigroup Inc. led 91 of 92 financial shares in the S&P 500 lower after Fitch Ratings said it may downgrade the AAA insurance rating on MBIA Inc., the largest bond guarantor.

The S&P 500 lost 44.18, or 3.2%, to 1,336.64. The Dow Jones Industrial Average decreased 370.03, or 2.9%, to 12,265.13. The Nasdaq Composite Index slipped 73.28, or 3.1%, to 2,309.57. Shares also retreated in Asia and Europe. Almost 11 stocks fell for every one that rose on the New York Stock Exchange.

“As the recession unfolds, then profits will disappoint,” a mananger of $420 billion as the global markets strategist at JPMorgan Private Bank, Stuart Schweitzer, who said in a Bloomberg Television interview from New York. “It’s already under way.”

Fourth-quarter profits at the 311 companies in the S&P 500 that reported results so far declined 23% on average, according to data compiled today by Bloomberg. Still, 64% of the companies posted earnings that topped analysts’ estimates, compared with 60% a year ago.

The S&P 500 has lost 9% so far in 2008 for the worst-ever start to a year in the benchmark’s eight-decade history, according to S&P analyst Howard Silverblatt. The Dow is down 7.5% this year and the Nasdaq has lost 13%. The S&P 500 has fallen 4.2% this week, the steepest two-day retreat since January 2003.

Shares also declined on signs the American slowdown is spreading to Europe and Asia. Europe’s service industries grew at the slowest pace in more than four years and retail sales dropped the most since 1995, reports showed yesterday. Asian equities fell as Yamaha Motor Corp. said operating profit will slide for the first time in eight years amid falling American demand.

Commodities producers fell after the contraction in the services industry prompted crude for March delivery to fall 1.8% to $88.41 a barrel. Gold and copper prices also dropped.

Exxon Mobil, the biggest American oil company, lost $3.33 to $82.11. Chevron Corp., the second-largest, declined $2.28 to $79.74. Freeport-McMoRan Copper & Gold Inc. retreated $5.27 to $85.91. Newmont Mining Corp. fell $1.43 to $49.48.

GE, the second-largest American company by market value, lost $1.16 to $34.21.

The ISM’s non-manufacturing index, which assesses banks, retailers and construction companies, slumped to 41.9 from 54.4 the prior month. A reading of 50 is the dividing line between growth and contraction.

Citigroup, the biggest American lender by assets, lost $2.17 to $27.05. Merrill Lynch & Co., the nation’s third-largest securities firm, slid $3.23 to $54.50. MBIA slipped 49 cents to $14.90. Ambac Financial Group Inc., the second-largest bond insurer, was unchanged at $11.39.