Aug. 19 (Bloomberg) -- U.S. stocks declined for a second day after wholesale prices rose twice as fast as economists estimated, housing starts fell and concern grew that the nation's biggest financial firms will post more losses.
American International Group Inc., the largest insurer, and Lehman Brothers Holdings Inc., the biggest mortgage-bond underwriter, retreated more than 6 percent as analysts warned of more writedowns. Centex Corp. and Pulte Homes Inc. sent homebuilder shares to a three-week low on a government report that builders broke ground on the fewest houses in 17 years. Staples Inc. decreased the most since 2006 and Saks Inc. dropped as much as 13 percent after saying results will miss forecasts.
The Standard & Poor's 500 Index lost 10.30 points, or 0.8 percent, to 1,268.30 at 10:32 a.m. in New York. The Dow Jones Industrial Average declined 108.94, or 1 percent, to 11,370.45. The Nasdaq Composite Index slipped 20.82, or 0.9 percent, to 2,396.16. Four stocks dropped for each that rose on the New York Stock Exchange.
``With the continued bad news from the financial sector, some retail information that was disappointing and no sign of improvement in housing, everything is bumping along the bottom,'' said John Carey, a Boston-based money manager at Pioneer Investment Management, which oversees about $300 billion. ``Every sensible person should be at the beach today.''
`Spooked Investors'
A government report before the market opened that said prices paid to U.S. producers in July rose 1.2 percent ``spooked people a bit,'' Carey added. So-called core producer prices that exclude fuel and food climbed 0.7 percent. Economists estimated a 0.2 percent increase.
Almost 207 million shares traded on the NYSE, or 14 percent less than the same time a week ago. Trading was the slowest for a full session since Dec. 27 yesterday.
The S&P 500 is down 19 percent from an October record after the biggest U.S. housing slump since the Great Depression slowed consumer spending and spurred turmoil in credit markets. Signs that economies in Asia and Europe are deteriorating also weighed on global equities today, sending the MSCI World Index to a 1.3 percent drop.
AIG fell the most in the Dow average, decreasing $1.33, or 6.2 percent, to $20.27. Goldman Sachs Group Inc. said it's ``increasingly likely'' the insurer will have to raise more capital. AIG may have to pay $20 billion on credit-default swaps that the company sold to protect fixed-income investors against losses, resulting in rating-firm downgrades and a ``large scale'' capital raise, analyst Thomas Cholnoky said in a note today.
Lehman slumped 95 cents to $14.08. The fourth-biggest U.S. securities firm may write down about $4 billion in credit-related investments and other assets when it reports fiscal third-quarter earnings, JPMorgan Chase & Co. analysts said.
Still `Difficult'
``The credit environment continues to be difficult,'' New York-based analysts led by Kenneth Worthington wrote in a report yesterday. ``It will be another difficult quarter for Lehman.''
The S&P 500 Financials Index lost 2.2 percent, the most among 10 industries.
Credit market turmoil has driven the U.S. into a recession and may topple some of the nation's biggest banks, said Kenneth Rogoff, former chief economist at the International Monetary Fund.
``The worst is yet to come in the U.S.,'' Rogoff said in an interview in Singapore. ``The financial sector needs to shrink; I don't think simply having a couple of medium-sized banks and a couple of small banks going under is going to do the job.''
The U.S. housing slump has triggered more than $500 billion of credit market losses for banks globally and led to the collapse and sale of Bear Stearns Cos., the fifth-largest U.S. securities firm.
17-Year Low
Centex lost 15 cents to $14.56. Pulte retreated 22 cents to $12.31. The S&P 500 Homebuilders Index declined 1.7 percent.
Builders in the U.S. broke ground on the fewest houses in 17 years in July, signaling the residential-construction slump will continue to hurt economic growth. The 11 percent decrease to an annual rate of 965,000, the lowest since March 1991, followed a 1.084 million pace the prior month, the Commerce Department said. July's level was higher than economists anticipated. Building permits, a sign of future construction, also fell.
Saks tumbled 9.9 percent, the most since March, to $10.11. The U.S. luxury chain reported its biggest quarterly loss in two years on discounts for women's apparel and said second-half sales will be lower than it forecast earlier.
Staples fell 5.2 percent, the most since May 2006, to $23.30. The world's largest office-supplies retailer said full- year profit may rise less than it thought.
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