American stocks fell for a second day after Wachovia Corp. reported an unexpected first-quarter loss and Goldman Sachs Group Inc. predicted more disappointing earnings will drive the market lower in coming weeks. Wachovia, the fourth-largest American bank, retreated to a seven-year low after cutting its dividend and saying it plans to raise $7 billion to replenish capital depleted by mortgage losses. Citigroup Inc. fell after Merrill Lynch & Co. said a slowdown in consumer finance and capital markets will hurt profits. International Business Machines Corp. and Exxon Mobil Corp. gained, helping to limit losses in the Dow Jones Industrial Average.

“The news out of Wachovia would suggest the environment has probably deteriorated faster in recent weeks, to a greater extent than people may have anticipated,” the New York-based head of American large-cap equities at London-based Schroders Plc., Jonathan Armitage, said.

Banks face “a tougher environment for the consumer, whether it’s housing- or mortgage-related, or direct-to-consumer lending.”

The S&P 500 has fallen in four of the last five trading sessions after profits missed analysts’ estimates at Alcoa Inc. and General Electric Co. last week. First-quarter earnings have been “awful” and are a “harbinger of things to come,” a team led by Goldman’s American investment strategist, David Kostin, wrote in a note to clients yesterday.