May 11 (Bloomberg) -- U.S. stocks retreated from a four- month high after the Standard & Poor’s 500 Index traded at the most expensive level in seven months relative to earnings and lower energy prices weighed on commodity producers. European shares and oil fell, while Treasuries and the dollar advanced. Capital One Financial Corp., U.S. Bancorp and BB&T Corp. tumbled at least 5 percent on plans to sell shares to repay government bailout funds. Bank of America Corp. and Wells Fargo & Co. slid more than 2.5 percent after a measure of financial stocks surged 23 percent last week. Alcoa Inc., the largest U.S. aluminum producer, and Exxon Mobil Corp. slumped as energy and metals prices fell. The S&P 500 lost 1.5 percent to 915.36 at 10:22 a.m. in New York. The Dow Jones Industrial Average declined 105.94 points, or 1.2 percent, to 8,468.71. Europe’s Dow Jones Stoxx 600 Index slid 1.6 percent. Six stocks declined for each that rose on the New York Stock Exchange, the broadest sell-off in three weeks. “The market has gone too far, too fast,” Douglas Cliggott, the Greenwich, Connecticut-based manager of the $81 million Dover Long/Short Sector Fund, which beat 97 percent of its peers last year, told Bloomberg Radio. “There is a risk that the market will give quite a bit of the move back.” The S&P 500 last week rose 5.9 percent, erasing this year’s losses, after results from the government’s examination of banks reassured investors and the Labor Department said the pace of job cuts slowed in April. The measure’s 37 percent jump from March 9 through May 8 is the most over similar spans since the 1930s. The S&P 500 ended last week trading at 15.1 times its members’ reported earnings, according to Bloomberg data, the highest since October. Pace of Recovery The biggest earnings-season rally since 2002 has pushed 34 percent of the companies in the S&P 500 above analysts’ price targets for the next year, raising concerns about the pace of the recovery. The benchmark index for U.S. equities is within 5 percent of the combined price projections of more than 1,700 securities analysts after gaining 14 percent since Alcoa reported first-quarter results on April 7. Earnings for S&P 500 companies will slide 35 percent this quarter and 23 percent in the July-to-September period, according to analyst estimates compiled by Bloomberg. Options traders are increasing bets that the rally is about to end. Futures on the Chicago Board Options Exchange Volatility Index, which measures the cost of buying or selling options as insurance against declines in the S&P 500, are priced above the gauge’s level of 32.05. The premium on VIX contracts expiring this month through November indicates traders are betting the stock index will fall in the next six months. Bank of America Drops Bank of America Corp., the biggest U.S. lender by assets, fell 4.1 percent to $13.59. JPMorgan Chase & Co., which passed stress tests without needing fresh capital, sank 4.6 percent to $37.16. Wells Fargo & Co. retreated 3.2 percent to $27.27. The fourth-largest U.S. bank raised $8.6 billion by selling shares, more than planned, after the government found the bank didn’t have enough capital to withstand a prolonged recession. Capital One lost 10 percent to $28.08. U.S. Bancorp sank 5.9 percent to $19.33. BB&T, which also cut its dividend today, slid 5 percent to $25. Banks that accepted bailout money from the Troubled Asset Relief Program are subject to government oversight and restrictions on compensation that they say put them at a disadvantage to competitors. ‘Take a Breather’ “The relief over the stress tests drove markets and improved sentiment last week,” said Thomas Schudel, a fund manager at Clariden Leu in Zurich, which oversees about $88 billion. “We could see the market take a breather today.” HSBC Holdings Plc fell for the first time in eight days, slipping 1.7 percent to 567.5 pence. Michael Geoghegan, the chief executive officer of Europe’s biggest bank, said 2009 will be a “tough” year as bad loans increase and the economy deteriorates, while Asia remains “resilient.” General Motors Corp. dropped 6.2 percent to $1.51 for the steepest decline in the Dow average. The biggest U.S. automaker said it’s more probable that it will need to file for bankruptcy. Alcoa lost 5.5 percent to $9.46. Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, declined 4.6 percent to $49.41. Commodities Slump Copper prices fell for the third straight session in New York on signs that demand may ease in China, the world’s biggest user of industrial metals. Inventories monitored by the Shanghai Futures Exchange jumped 45 percent last week, the most since February. The Reuters/Jefferies CRB Index of 19 commodities slipped 0.9 percent as gasoline, nickel and aluminum also dropped. Exxon, the world’s largest oil producer, sank 1.8 percent to $69.09. Crude fell as much as 3.2 percent to $56.78 a barrel in New York on speculation that last week’s 10 percent advance will be undone as U.S. inventories climb and fuel consumption declines. Dish Network Corp. surged 17 percent to $17.91 for the biggest advance since October. The nation’s second-largest satellite-television provider posted first-quarter profit that exceeded analysts’ estimates after raising prices for services like high-definition TV. To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

Source