Nov. 21 (Bloomberg) -- U.S. stocks fell, halting a two-week advance, as a worsening outlook for technology company earnings added to concern that the eight-month rally in equities outpaced the prospects for economic growth.

Intel Corp. dropped 2.9 percent, the steepest retreat in the Dow Jones Industrial Average, as Bank of America Corp. said computer-chip supply may overwhelm demand. Dell Inc. tumbled 7.2 percent after profit decreased by more than half. Stocks also slid as yields on Treasury three-month bills turned negative for the first time since financial markets froze last year. Metals producers rose as gold climbed to a record and the dollar fell.

The Standard & Poor’s 500 Index lost 0.2 percent this week to 1,091.38 after gaining 5.5 percent in the first two weeks of November. The Dow average added 47.69 points, or 0.5 percent, to 10,318.16, led by Merck & Co. and Pfizer Inc. The Russell 2000 Index dropped 0.3 percent to 584.68.

“It is normal for stocks to pull back after such a strong run,” said Lawrence Creatura, a Rochester, New York-based money manager at Federated Investors Inc., which oversees $390 billion. “It’s reasonable for investors to take a pause when they’re faced with such a broad variety of uncertainties.”

Six of 10 industries in the S&P 500 fell this week. The index retreated from a 13-month high on Nov. 17 as yields on Treasury three-month bills turned negative amid concern the rally in risk assets has outpaced growth prospects. The S&P 500 has rallied 61 percent from a 12-year low on March 9, pushing its price to about 22 times the reported earnings of its companies, the highest level since 2002.

Dell Retreats

Dell fell 7.2 percent to $14.29. The company, which lost its standing as the world’s second-biggest computer seller to Acer Inc., reported a 54 percent drop in third-quarter net income to $337 million, or 17 cents a share, as sales slid 15 percent to $12.9 billion. Analysts on average predicted profit of 27 cents a share and sales of $13.1 billion.

Intel, the world’s largest chipmaker, and Texas Instruments Inc., the second-biggest U.S. chipmaker, dropped after being cut to “neutral” from “buy” at Bank of America. The bank cut its outlook for the semiconductor industry to “negative” from “positive,” sending technology stocks to the steepest drop of 10 industries in the S&P 500. Intel lost 2.9 percent to $19.24 and Texas Instruments slid 2.8 percent to $24.74.

SanDisk Falls

SanDisk Corp., the world’s largest maker of flash-memory cards used in digital cameras and mobile phones, dropped 7.8 percent to $20.24. Technology shares have rallied 52 percent so far this year, compared with a 21 percent gain in the S&P 500. The shares have also outperformed the S&P 500 since March 9, advancing 76 percent.

Raw-materials producers rallied 1.4 percent, the second- most among the 10 industries in the S&P 500, as commodity prices rose, led by gold and copper.

“If the economy is turning, which it is, industrials and materials should continue to do better,” said David Katz, who oversees $1.2 billion at Matrix Asset Advisors in New York. “Materials might be the better gainer because of their gold exposure.”

Barrick Gold Corp. rose 2.5 percent to $43.98 and Freeport- McMoRan Copper & Gold Inc. added 3.7 percent to $84.57 as bullion climbed to a record $1,153.40 an ounce on Nov. 18. The precious metal has fallen only once this month as investors speculated the dollar will extend its steepest plunge since 1986, boosting gold’s appeal as an alternative investment.

Commodities Rally

The Reuters/Jefferies CRB Index of 19 raw materials added 2 percent, rebounding from three weeks of losses. The gain outpaced a 0.4 percent advance in the Dollar Index, a six- currency gauge of the currency’s strength.

Consumer discretionary stocks dropped 1.1 percent, the second-steepest decline among 10 industries. Target Corp. fell 3.1 percent to $47.46 as the second-biggest U.S. discount chain said it is planning for a “modest” decrease in fourth-quarter comparable-store sales. Home Depot Inc. slumped 0.6 percent to $27.18 after the largest U.S. home-improvement retailer posted third-quarter profit that fell 8.9 percent as homeowners curbed large purchases and professional contractors spent less.

Sprint Nextel Corp. climbed the most in the S&P 500, rising 21 percent to $3.76. The third-largest U.S. mobile-phone carrier rallied after it finished paying off a $4.5 billion loan, helping lower expenses to counter a shrinking subscriber base.

Earnings Beat Estimates

About 80 percent of S&P 500 companies that have reported third-quarter results beat analysts’ predictions, including Sears Holdings Corp., Ltd. Brands Inc. and GameStop Corp. this week. That exceeds the record pace of 72.3 percent for the period ended in June, data compiled by Bloomberg show.

Hewlett-Packard Co. and Deere & Co. are among 10 companies in the S&P 500 scheduled to report results next week. A report will probably show sales of existing U.S. homes increased in October to the highest level in more than two years, spurred in part by a tax credit that lured first-time buyers, according to the median estimate of economists surveyed by Bloomberg. Exchanges will be closed on Nov. 26 for the Thanksgiving holiday and trading will end at 1 p.m. New York time the next day.

The benchmark index for U.S. stock options fell 5 percent, declining for the third straight week. The VIX, as the Chicago Board Options Exchange Volatility Index is known, dropped to 22.19. The index, which is known as Wall Street’s fear gauge, is down from a record 80.86 in November 2008 yet above its 20.28 average over its 19-year history.

To contact the reporters on this story: Sapna Maheshwari at smaheshwar11@bloomberg.net. Last Updated: November 21, 2009 08:00 EST