e it can't value the holdings. Home Depot Inc., the largest home-improvement chain, fell the most in a year after saying the $10.3 billion purchase price for its contractors' unit may be cut as investors shun riskier debt.

The Standard & Poor's 500 Index dropped for the first time this week, decreasing 15.4, or 1 percent, to 1482.09 at 11:32 a.m. in New York. The Dow Jones Industrial Average retreated 136.24, or 1 percent, to 13,521.62. The Nasdaq Composite Index slipped 12.29, or 0.5 percent, to 2600.69. Europe's Dow Jones Stoxx 600 Index lost 6.73, or 1.8 percent, to 374.32.

``It looks hideous out there,'' said John Wilson, co- director of equity strategy at Morgan Keegan & Co., which oversees $20 billion in Memphis, Tennessee. ``The fear is obviously not that BNP Paribas has a problem, but that it's much more widespread.''

National benchmarks dropped in all 18 western European markets. The U.K.'s FTSE 100 slid 1.8 percent and Germany's DAX decreased 1.7 percent. France's CAC 40 lost 2 percent.

A gauge of U.S. stock-market volatility climbed for the first time in four days. The Chicago Board Options Exchange Volatility Index gained 14 percent to 24.48. Higher readings in the so-called VIX, derived from prices paid for S&P 500 options, indicate traders expect larger share-price swings in the next 30 days.

Banking Stocks

Citigroup, the biggest U.S. bank, declined $1.65 to $47.84. Bank of America Corp. fell 75 cents to $48.95. JPMorgan retreated $1.45 to $45.06. Goldman Sachs Group Inc., the largest securities firm, dropped $5.73 to $187.57. A gauge of financial shares in the S&P 500 declined 1.8 percent and contributed the most to the overall index's retreat.

BNP Paribas joins Bear Stearns Cos. and Union Investment Management GmbH in stopping fund redemptions. The BNP Paribas funds had about 1.6 billion euros ($2.2 billion) of assets on Aug. 7, after declining 20 percent in less than two weeks, a spokesman said. The bank will stop calculating a net asset value for the funds, which have about a third of their money in subprime securities rated AA or higher. Its shares fell 3.9 percent.

Dutch investment bank NIBC Holding NV also said today it lost at least 137 million euros ($189 million) on U.S. subprime investments this year.

``There's a huge amount of fear out there right now,'' said Joseph Saluzzi, co-head of equity trading at Themis Trading LLC in Chatham, New Jersey.

Home Depot Drops

Home Depot lost $1.71 to $36.09. The company scaled back plans for a stock buyback and said it was in talks with buyout firms Bain Capital LLC, Carlyle Group and Clayton Dubilier & Rice about restructuring the sale of HD Supply, which provides tools and lumber to construction companies. Financing for the purchase may be at issue as investors, hit by losses on subprime mortgages, shun riskier debt.

The risk of owning corporate bonds soared today. Credit- default swaps on the CDX North America Investment Grade Index rose as much as 11 basis points to 71 basis points, according to Phoenix Partners Group in New York, indicating a decline in perceptions of credit quality.

Libor

The overnight rates banks charge each other to lend in dollars jumped to the highest in six years. The so-called dollar London interbank offered rate rose to 5.86 percent today from 5.35 percent.

The European Central Bank said it would provide unlimited cash as the fastest increase in overnight Libor since June 2004 signaled banks are reducing the supply of money. The Federal Reserve added $24 billion in temporary reserves to the banking system.

Sanford C. Bernstein & Co. cut its 2007 and 2008 profit estimates for Goldman, Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns on concern that tighter credit markets will reduce earnings from bond trading and underwriting debt to fund leveraged buyouts.

`Painful'

``Based on history, we believe that today's credit re- pricing is going to be painful for the brokerage firms,'' New York-based analysts including Brad Hintz wrote in a report published today.

Morgan Stanley, the No. 2 securities firm, lost $3.31 to $62.08. Merrill, the third biggest, retreated $2.69 to $75.48. Lehman, the biggest U.S. underwriter of mortgage bonds, declined $2.79 to $61.99. Bear Stearns, the No. 2 mortgage-bond underwriter, fell $4.41 to $116.71.

In Europe, BNP slid 3.8 percent to 82.19 euros, the biggest decline since May 24.

Commerzbank dropped 5.1 percent to 29.73 euros even as the bank said second-quarter profit more than doubled on a gain from the sale of its Jupiter fund unit.

Deutsche Bank, Germany's biggest bank, fell 3.9 percent to 98.63 euros.

Economic Drag

The U.S. economy will grow less than previously forecast as the rout in subprime borrowing hampers consumer spending, economists said. Growth will slow to an average 2.6 percent annual pace in the second half of the year, 0.2 percentage point less than economists forecast in July, according to a Bloomberg News Survey taken Aug. 1 to Aug. 8.

Energy shares in the S&P 500 declined 1 percent as a group after crude oil for September delivery fell $1.03, or 1.4 percent, to $71.12 a barrel in New York on concern reduced U.S. economic expansion will cut fuel demand at a time of higher-than- normal supplies.

Exxon Mobil Corp., the world's biggest energy company, dropped $1.66 to $85.89. Chevron Corp., the second-largest U.S. oil producer, lost 79 cents to $83.54.

In economic data today, initial jobless claims rose by a more-than-forecast 7,000 to 316,000 in the week ended Aug. 4, the Labor Department said. The four-week moving average, a less volatile measure, increased to 307,750 from 306,000.

U.S. stocks gained for a third day yesterday after Cisco Systems Inc. raised its sales forecast. Profit at the 444 S&P 500 companies that posted earnings so far rose 10.9 percent, on average. At the end of March, analysts expected 3.2 percent growth for the second quarter.

To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net .