Shares of energy companies slid after President George W. Bush said he will stop deliveries to an emergency oil reserve and promote alternative fuels. Valero Energy Corp. paced the retreat as crude-oil prices dropped for a second day.

Duke Energy Corp. led a decline in utility shares, among the most sensitive to borrowing costs, as the yield on 10-year Treasury notes jumped to the highest since 2002. Reports showed optimism among consumers reached a four-year high this month and sales of existing homes rose 0.3 percent in March.

``People were expecting lower consumer confidence, lower house sales, and less pressure on the Fed to raise rates,'' said John Davidson, president of PartnerRe Asset Management in Greenwich, Connecticut, which invests more than $9.5 billion. The rise in bond yields ``has frightened the equity market.''

The Standard & Poor's 500 Index declined 6.37, or 0.5 percent, to 1301.74, the biggest drop since April 11. The Dow Jones Industrial Average lost 53.07, or 0.5 percent, to 11,283.25. The Nasdaq Composite Index fell 3.08, or 0.1 percent, to 2330.30.

The market declined even after companies including AT&T Inc. and Yum! Brands Inc. posted first-quarter profits that topped analysts' expectations.

Economic Reports

The Conference Board's consumer confidence index rose to 109.6 this month from 107.5 in March, higher than the most optimistic forecast among economists surveyed by Bloomberg News.

Sales of previously owned homes climbed last month to an annual pace of 6.92 million, according to the National Association of Realtors. Economists expected a rate of 6.66 million in a Bloomberg survey.

Yields on 10-year Treasury notes increased on expectations that the Fed will raise rates beyond its next policy meeting on May 10. Yields climbed almost 10 basis points, or 0.1 percentage point, to 5.07 percent in New York, the highest since June 11, 2002, according to Cantor Fitzgerald LP. Prices, which move inversely to yields, fell the most since July.

The Fed has boosted the overnight lending rate 15 straight times to 4.75 percent. Last week, stocks rallied after minutes from the latest Fed policy meeting suggested the central bank may be close to stopping.

Interest-rate futures indicate that traders are pricing in about a 52 percent chance that the Fed will raise rates to 5.25 percent by mid-year, up from 42 percent yesterday.

`Adds Fuel'

``The headwind for the last 18 months has been uncertainty over how much further the Fed was going to take rates,'' said Scott Wren, senior equity strategist at A.G. Edwards & Sons Inc. in St. Louis. ``News like we heard today just kind of adds fuel to that fire.''

Eight stocks fell for every five that rose on the New York Stock Exchange. Some 1.68 billion shares changed hands on the Big Board, 2.8 percent more than the three-month average.

A gauge of utilities lost 1.3 percent for the worst performance among 10 industry groups in the S&P 500. Higher bond yields make the utilities group's dividend payouts less attractive. The utilities measure has a 3.6 percent dividend yield, twice the S&P 500's yield of 1.8 percent.

Duke Energy, the largest U.S. utility owner, retreated 70 cents to $28.60. Edison International, owner of California's second-largest utility, fell 30 cents to $40.50. PPL Corp., a Pennsylvania utility owner, slid 55 cents to $28.83.

Bush Speech

President Bush said in Washington that he would allow the Environmental Protection Agency to waive requirements for gasoline to be blended with ethanol in order to eliminate bottlenecks, and suspend deposits to the Strategic Petroleum Reserve. The president ordered the Justice Department to look for possible price manipulation.

Oil for June delivery lost 0.6 percent to $72.88 a barrel in New York, extending yesterday's 2.5 percent drop. A gauge of S&P 500 energy stocks slumped 1.1 percent for the second- steepest loss among 10 groups.

Valero, the largest U.S. oil refiner, lost $2.80 to $66.30 even after reporting a 59 percent surge in first-quarter profit. Exxon Mobil Corp., the world's biggest publicly traded oil company, decreased 46 cents to $63.95.

AT&T, the largest U.S. telephone company, rose 7 cents to $25.60 after earlier rising as high as $26.04. AT&T said profit, excluding some costs, increased to 52 cents a share as fewer customers switched off phone lines and demand for Internet access surged. Analysts expected 49 cents in a survey by Thomson Financial, which doesn't disclose the basis of its estimates to Bloomberg News.

A measure of telephone stocks advanced 0.5 percent for the best performance in the S&P 500.

Earnings Scorecard

This week is the busiest for first-quarter earnings. About 72 percent of the S&P 500 companies that have reported results so far have beaten analyst estimates, more than the 57 percent average since 1992, data from Thomson show.

``As long as energy prices remain high and Treasuries remain over 5 percent, I think that there's sort of a tug of war'' with earnings, said Leo Grohowski, chief investment officer at U.S. Trust Corp. in New York, which oversees $108 billion.

Yum! Brands, the owner of restaurant chains including Taco Bell, rallied $1.74 to $51.34. The company lifted its 2006 profit forecast as first-quarter results exceeded analysts' estimates. The company said it will earn at least $2.81 a share this year, up from an earlier estimate of $2.79. The stock's rating was raised at CIBC World Markets and Piper Jaffray & Co.

Railroad Stocks

Burlington Northern Santa Fe Corp. led railroad stocks lower, sinking $5.35, or 6.2 percent, to $81.49. The No. 2 U.S. railroad by sales said full-year profit will be $4.81 a share. The new projection is less than the $4.85 expected on average by 10 analysts in a Thomson survey.

Norfolk Southern Corp. fell $2.42 to $54.25.

Coach Inc. dropped $2.34, or 6.7 percent, to $32.86 for the biggest slide in the S&P 500. The largest U.S. seller of luxury leather goods said fiscal third-quarter profit rose 35 percent to $108.8 million, or 28 cents a share, the smallest gain in a year. Revenue in the period increased 20 percent to $497.9 million, the smallest increase in four years.

Google Inc. declined $13.34 to $427.16. French President Jacques Chirac, seeking to end what he calls the U.S. dominance of the Web, said his government will provide 90 million euros ($112 million) in subsidies and loans to a Thomson SA-led group to develop an Internet search engine to take on Google and Yahoo! Inc.

Spiders, QQQQs

S&P 500 shares, called Spiders, fell 54 cents to $130.37. Nasdaq-100 tracking shares, known by their QQQQ symbol, slipped 9 cents to $41.87.

S&P 500 futures expiring in June dropped 5.10 to 1309.40 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures tumbled 7.00 to 1714.50.

The Russell 2000 Index, a benchmark for companies with a median market value of $667 million, retreated 0.2 percent to 764.82. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, lost 57.84, or 0.4 percent, to 13,180.07. Based on the changes in the Wilshire, the value of stocks decreased by $57.84 billion.

AT&T Inc. (T US) Burlington Northern Santa Fe Corp. (BNI US)
Coach Inc. (COH US) Duke Energy Corp. (DUK US) Google Inc. (GOOG
US) Edison International (EIX US) Exxon Mobil Corp. (XOM US)
Norfolk Southern Corp. (NSC US) Pacific Ethanol Inc. (PEIX US)
PPL Corp. (PPL US) Yum! Brands Inc. (YUM US) Valero Energy Corp.
(VLO US) 
To contact the reporter on this story:
Dune Lawrence in New York at  dlawrence6@bloomberg.net.