By Elizabeth Stanton Oct. 2 (Bloomberg) -- U.S. stocks tumbled, while Treasuries and the dollar rose, as a bigger-than-estimated loss of jobs spurred concern the highest unemployment rate in 26 years will stifle an economic recovery. Oil and metal prices slid. General Electric Co., Bank of America Corp. and Alcoa Inc. lost at least 3 percent after the Labor Department said the nation lost 263,000 jobs in September, more than the 175,000 median estimate in a survey of economists. The unemployment rate climbed to 9.8 percent. Chevron Corp. and Exxon Mobil Corp. declined as crude retreated as much as 3.5 percent. “We’re hitting a little bit of a soft spot in economic growth,” said Michael Mullaney, a money manager at Fiduciary Trust Co. in Boston, which oversees $9 billion. “We would not be surprised to see a 5 percent-plus pullback in the marketplace. I still think we’ll be higher by year-end” as third- and fourth-quarter economic growth and corporate earnings outpace expectations. The Standard & Poor’s 500 Index retreated 0.8 percent to 1,022.09 at 9:35 a.m. in New York. The Dow Jones Industrial Average slid 0.5 percent to 9,460.84. Europe’s benchmark index fell 2.2 percent, the most since July, and Asia’s lost 2.1 percent. The yield on the 10-year Treasury note fell six basis points to 3.12 percent. The S&P 500 has declined 2.3 percent this week on concern the seven-month rally in equities has outpaced prospects for an economic recovery. U.S. stocks yesterday tumbled the most in three months as a gauge of manufacturing unexpectedly fell and jobless claims grew more than forecast. The S&P 500 jumped almost 15 percent in the July-to- September period to give it a two-quarter advance of 34 percent, the biggest since a 42 percent surge in the first half of 1975. The Dow also rose 15 percent in the third quarter and gained 29 percent in March through September, its steepest two-quarter advance since 1986. Valuation The rally has pushed the S&P 500 up as much as 58 percent from a 12-year low in March and sent its price-to-earnings valuations last month to the highest levels since 2004. The measure is valued at about 19.4 times its companies’ reported operating profits, according to weekly Bloomberg data. The U.S. recovery will falter as banks continue to curb lending to small companies, said Meredith Whitney, whose 2007 prediction that Citigroup Inc. would cut its dividend triggered a plunge in the bank’s stock. ‘Accelerating Pace’ “Access to credit is being denied at an accelerating pace,” Whitney said in a commentary in the Wall Street Journal. The number of U.S. lenders that can’t collect on at least 20 percent of their loans hit an 18-year high, signaling that more bank failures and losses could slow an economic recovery. Units of Frontier Financial Corp., Towne Bancorp Inc. and Steel Partners Holdings LP are among 26 firms with more than one-fifth of their loans 90 days overdue or not accruing interest as of June 30 -- a level of distress almost five times the national average -- according to Federal Deposit Insurance Corp. data compiled for Bloomberg News by SNL Financial, a bank research firm. Exxon Mobil, the biggest U.S. oil company, fell 0.8 percent to $66.73. Chevron, the second-largest, slipped 0.8 percent to $68.24 as crude for November delivery dropped as much as 3.5 percent to $68.32 on the New York Mercantile Exchange. CIT Group Inc. rose 9.4 percent to $1.16. The 101-year-old commercial lender is seeking to cut at least $5.7 billion of debt as part of a plan to avoid collapse and return to profitability after nine quarters of losses. First Solar Inc. added 2.9 percent to $147.86. The world’s largest maker of thin-film solar power modules was picked to replace Wyeth in the S&P 500 on a date to be determined later. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

Source