Aug. 12 (Bloomberg) -- U.S. stocks fell for the first time in three days after JPMorgan Chase & Co. said it may post more credit losses, pushing the worldwide costs for the collapse of the subprime mortgage market to more than $500 billion.

JPMorgan, the second-largest U.S. bank by market value, dropped the most since 2002 after saying trading conditions have ``substantially deteriorated.'' Goldman Sachs Group Inc. had its worst decline in five months as Deutsche Bank AG analyst Mike Mayo and Oppenheimer & Co.'s Meredith Whitney cut profit estimates for the biggest securities firm. Wachovia Corp. slid 12 percent and Morgan Stanley tumbled 6.4 percent as financial shares erased yesterday's advance.

The Standard & Poor's 500 Index slid 15.73 points, or 1.2 percent, to 1,289.59. The Dow Jones Industrial Average decreased 139.88, or 1.2 percent, to 11,642.47. The Nasdaq Composite Index slipped 9.34, or 0.4 percent, to 2,430.61. Two stocks dropped for each that rose on the New York Stock Exchange.

``It's going to be like a long, slow car crash to work through the housing situation,'' Joseph Veranth, chief investment officer at Dana Investment Advisors, which manages $2.8 billion in Brookfield, Wisconsin, told Bloomberg Radio. ``We're still in the middle of it.''

The S&P 500 has slumped 18 percent from its 2007 record as global credit losses, accelerating inflation and record fuel prices curb profit growth. Second-quarter earnings fell 23 percent for the 430 companies in the S&P 500 that released results since July 8, according to data compiled by Bloomberg. Financial industry earnings are down 91 percent.

Mortgage Woes

Benchmark indexes extended losses after Freddie Mac said it will stop buying subprime loans issued in New York state and the Dallas Morning News reported that Dallas Federal Reserve Bank President Richard Fisher said the current financial turmoil is worse than the savings and loan crisis of the late 1980s and early 1990s.

JPMorgan lost 9.5 percent to $37.92 after saying it expects the global economy ``to continue to be weak, for capital markets to remain under stress and for a continued decline in U.S. housing prices,'' according to a regulatory filing yesterday. ``Sharply widened'' spreads on mortgage-backed securities and loans have caused losses, the bank said.

Billionaire investor Michael Price is betting on further declines at Citigroup Inc. because the bank has ``more pain coming,'' he said in an interview yesterday. Price runs New York- based MFP Investors LLC and was chairman and chief executive officer of Franklin Mutual Advisers LLC in Short Hills, New Jersey. He said bank shares may lead a decline in the S&P 500 after the benchmark index for U.S. equities climbed 7.4 percent from July 15 to yesterday.

`Premature' Rally

``This rally we've had, this huge rally, seems to me pretty premature,'' Price said. ``Dividend cuts are inevitable. You're going to have to see them. How can they pay out dividends if they have to raise capital?''

Citigroup retreated 6.5 percent to $18.54. The biggest U.S. bank by assets has dropped 37 percent this year.

Goldman declined 6 percent to $167.30. Deutsche Bank cut its recommendation on the shares to ``hold'' from ``buy.'' The brokerage also reduced its price estimate on the stock 8.1 percent to $192, saying earnings are likely to be weaker than consensus estimates. Oppenheimer's Meredith Whitney lowered her profit estimates for Goldman for 2008 and 2009

Wachovia fell 12 percent to $16. The fourth-largest U.S. bank said its second-quarter loss was wider than reported last month after costs to settle a probe of auction-rate securities. Price said he also is betting Wachovia will continue falling.

Morgan Stanley

Morgan Stanley had the steepest drop in a month, retreating 6.4 percent to $42.50. Deutsche Bank's Mayo said continued credit market turmoil and global economic weakness will lessen 2008 and 2009 profit at the second-biggest U.S. securities firm by market value. He cut his earnings estimates and predicted $1.5 billion in third-quarter losses from ``troubled'' assets.

Zions Bancorporation slumped 14 percent to $28.10. The lender with operations in 10 U.S. states will limit lending and delay stock buybacks to preserve capital, Chief Financial Officer Doyle Arnold said. Moody's Investors Service said yesterday that it may downgrade the bank's credit ratings because of potential losses from loans to builders.

Other financial stocks dropped. Lehman Brothers Holdings Inc. sank 12 percent to $16.21. Washington Mutual Inc. tumbled 9.3 percent to $4.30. Bank of America Corp. fell 6.7 percent to $31.13.

`Lot of Hair'

The retreat in banks, brokerages and insurers reduced the S&P 500 Financials Index's rebound from a decade low on July 15 to 22 percent. Better-than-estimated earnings from Citigroup Inc. and Wells Fargo & Co. and a government rule to limit bets that bank stocks will decline have contributed to the group's surge during the past month. The industry is still the year's worst performer among 10 groups with a 28 percent drop for 2008.

``There's still a lot of hair and a lot of dirt on these financials,'' said Stephen Wood, who helps manage $213 billion as a senior portfolio strategist at Russell Investments in New York. ``This is something the average investor at home should be very careful about.''

Utilities in the S&P 500 dropped 2.1 percent as a group. Constellation Energy Group Inc., the biggest U.S. power marketer, lost 16 percent to $61.25 after increasing its estimated collateral obligations related to possible credit-rating downgrades.

The Nasdaq Composite fell less than the Dow and S&P 500, helped by gains in Biogen Idec Inc. Billionaire investor Carl Icahn increased his stake in the biotechnology company to 6 percent and said he'll keep up talks on ``value.'' Biogen shares increased 2.9 percent to $52.21.

Consumer Concern

McDonald's Corp. had the biggest decline since January, slipping 3.1 percent to $63.94. The world's largest restaurant chain was cut to ``neutral'' from ``buy'' by analysts at UBS AG, who said the company may not be able to maintain its valuation as U.S. job losses increase and economic growth slows in Europe.

Concern that consumer spending is slowing was reinforced last week when Wal-Mart Stores Inc., the world's largest retailer, said sales growth may slow in August. Wal-Mart shares dropped 6.3 percent on Aug. 7, the stock's worst decline since 2002, and gained 1.2 percent today.

Retail Sales

U.S. retail sales growth slowed for the first time in four weeks as consumers curtailed back-to-school spending because of higher food and gasoline costs. Sales at stores open at least a year rose 2.6 percent last week from a year earlier, the International Council of Shopping Centers said today.

Macy's Inc., Kohl's Corp., Nordstrom Inc. and J.C. Penney Co. are scheduled to report second-quarter results this week.

Raw material producers added 0.5 percent for the steepest advance among 10 S&P 500 industries. Monsanto Co. rose 3.3 percent to $111.48 and contributed the most to the industry group's advance after saying profit growth from corn seeds may increase faster than previously estimated as farmers sow more of the crop.

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By Lynn Thomasson