By Rita Nazareth and Nikolaj Gammeltoft June 11 (Bloomberg) -- U.S. stocks resumed declines, led by banks and consumer companies, as data showing the biggest drop in retail sales since September overshadowed an increase in consumer confidence. The Standard & Poor’s 500 Index lost 0.4 percent to 1,082.53 at 11:28 a.m. in New York. It had risen as much as 0.2 percent after the sentiment report. The measure pared its weekly rally to 1.6 percent, still the most in a month, after surging 3 percent yesterday. The Dow Jones Industrial Average retreated 40.36 points, or 0.4 percent, to 10,132.17. “Consumer confidence was quite a relief,” said James Paulsen, who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “I’m still expecting a lot of volatility, though. There are too many issues out there -- Europe, the oil spill. After yesterday’s rally, maybe some people will be wanting to take some profits.” The S&P 500 has posted back-to-back daily rallies only once since April. The benchmark index for U.S. stocks fell 11 percent since April 23 through yesterday on speculation the credit crisis spreading in Europe will curb global economic growth. U.S.-traded shares of BP Plc plunged 46 percent since April 20, when the biggest oil leak in U.S. history began at one of the firm’s wells in the Gulf of Mexico. “The market is hypersensitive to any negative data because of the tug-of-war for market direction that exists right now,” said Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees $350 billion. “Weaker-than-expected retail data is likely to be reflected in lower share prices in the short term because of the macro concern that the U.S. consumer will go back into a cocoon.” Sentiment, Sales Confidence among U.S. consumers rose in June to the highest level in more than two years, a private survey showed. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment increased to 75.5, the highest since January 2008, from 73.6 in May. The gauge was projected to rise to 74.5, according to the median forecast in a Bloomberg News survey of 65 economists. Earlier, the U.S. Commerce Department said retail sales decreased 1.2 percent, the biggest drop since September 2009, following a 0.6 percent April gain that was larger than previously estimated. Purchases were projected to increase 0.2 percent, according to the median estimate of 76 economists in a Bloomberg survey. Forecasts ranged from a decline of 0.7 percent to a gain of 1 percent. “Investors are very skittish,” said Peter Jankovskis, who helps manage about $2.2 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “Everyone is focused on the consumer to gauge the strength of the economic recovery. There’s concern about Europe, the oil spill. It’s been very hard to get a back-to-back rally.” To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net.

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