By Rita Nazareth Sept. 17 (Bloomberg) -- U.S. stocks fell, pulling benchmark indexes down from 11-month highs, on concern the market’s recent rally outpaced prospects for earnings growth as FedEx Corp. and Oracle Corp. reported sales that missed analysts’ estimates. FedEx and Oracle slid at least 2.2 percent, while Chesapeake Energy Corp . and Nabors Industries Ltd. led energy shares lower as natural gas tumbled. Verizon Communications Inc. lost 3 percent, leading telephone companies to the biggest drop among 10 groups. The S&P 500 fell for just the second time in 10 days after a six-month rally left the benchmark for U.S. stocks at the most expensive compared with earnings in five years. “We’re in rarefied air here,” said Peter Kenny , managing director in institutional sales at Knight Equity Markets in Jersey City, New Jersey. “We’ve had lots of good economic news, lots of stocks that have moved very dramatically. We need a breather here.” The S&P 500 lost 0.3 percent to 1,065.49 at 4:05 p.m. in New York after closing at the highest level since Oct. 3 yesterday. The Dow Jones Industrial Average slipped 7.79 points, or less than 0.1 percent, to 9,783.92. Equities rallied in early trading as initial jobless claims unexpectedly decreased and reports showed faster-than-forecast growth in housing starts and manufacturing in the Philadelphia region. Speculation that government measures will help revive the economy and better-than-estimated earnings at companies from Goldman Sachs Group Inc. to Johnson & Johnson have spurred a 57 percent rally in the S&P 500 from its 12-year low on March 9. ‘Terrific Time to Buy’ The economy is in a global growth cycle and now is a “terrific time to buy stocks,” Mario Gabelli , the chairman and chief executive officer of Gamco Investors Inc., said in an interview with Bloomberg Television. Still, some investors are questioning whether the six-month rally has been too much, too fast. Valuations in the S&P 500 rose to about 19.3 times the reported earnings from continuing operations of its companies as of Sept. 11, the highest level since June 2004, according weekly data compiled by Bloomberg. “Everybody is trying to figure out if growth can really catch up to the confidence that people do have in the market,” said Anthony Conroy , head trader at BNY ConvergEx Group in New York. “Are we a little bit ahead of ourselves? I’d say we’re a little overbought here.” FedEx fell 2.2 percent to $76.46. Quarterly revenue at the second-largest U.S. package-shipping company slid 20 percent to $8.01 billion, trailing the $8.23 billion average estimate of 9 projections compiled by Bloomberg. Oracle’s Sales Oracle Corp. slid 2.8 percent to $21.52. Sales of database and so-called middleware programs plunged 22 percent to $711 million in the quarter ended Aug. 31, the company said yesterday. That compares with the $826 million estimate of Patrick Walravens , an analyst with JMP Securities Inc. in San Francisco. “We’re looking at a global recovery and the latest economic numbers confirm that,” said Philip Orlando , who helps oversee $400 billion as chief equity market strategist at Federated Investors Inc. in New York. “But everyone would like to see some top-line improvement. Investors are reacting to a top-line miss from two bellwethers.” Chesapeake Energy Corp. dropped 3.3 percent to $27.97 as natural gas futures fell on speculation a 56 percent rally from a seven-year low took prices higher than warranted by weak demand and bulging stockpiles. Verizon, Eastman Kodak Slump Verizon led a gauge of phone companies down 1.3 percent, for the biggest decline in the S&P 500 among 10 industry groups. Chief Executive Officer Ivan Seidenberg signaled Verizon’s wireless business would examine paying a dividend to its joint owners only after paying down the unit’s debt. Verizon declined 3 percent to $29.51. Eastman Kodak Co. fell 11 percent to $5.93. The photography company reshaping itself in the digital age said it expects to raise as much as $700 million by selling senior secured notes due in 2017, with KKR & Co. committing to buy more than half of the notes. The deal could be up to 40 percent dilutive to Kodak’s share count, Brean Murray Carret & Co. analyst Ananda Baruah wrote in a note to clients. Paul Volcker , the former Fed chairman who’s an economic adviser to President Barack Obama , said there’s a “long way to go” before the economy returns to pre-recession levels. ‘Long Slog’ “It will be a long slog -- a matter of years -- with the risk of some relapses along the way,” Volcker said yesterday at a financial conference in Beverly Hills, California. Citigroup Inc., the biggest user of U.S. government debt guarantees extended under last year’s bank rescue, climbed 5.2 percent to $4.42. The Federal Reserve has kept its target rate for overnight lending between banks at near zero to unlock credit markets after the bankruptcy of New York-based Lehman Brothers Holdings Inc. last September. Valero Energy Corp. had the biggest gain in the S&P 500, rising 6.6 percent to $20.50. An increase in U.S. energy demand should spark an immediate revival of interest in U.S. refining stocks, Mark Flannery , analyst at Credit Suisse Group AG, wrote in a report today. Sunoco Inc. added 2.6 percent to $28.73. Tesoro Corp. rose 4.3 percent to $15.69. Nucor Corp. gained 3.6 percent to $49.84. The second- largest U.S.-based steel producer was upgraded to “buy” from “hold” at Citigroup, which said Nucor may return to profit in the fourth quarter. The S&P 500 may rally another 20 percent, the amount by which it yesterday exceeded its average level from the previous 200 days, according to an analysis by Birinyi Associates Inc. ‘Long-Term Strength’ The S&P 500 closed yesterday 20.1 percent above its 200-day moving average of 889.64, according to data compiled by Bloomberg. The index has climbed 20 percent above its 200-day moving average three other times since World War II, in 1975, 1982 and 1986, and each move resulted in gains ranging from 13 percent to 20 percent a year later, Cleve Rueckert , an analyst for the Westport, Connecticut-based research and money management firm founded by Laszlo Birinyi , wrote in a note. “While bears might point to the short-term overbought condition, the current rally is indicative of long-term strength,” Rueckert wrote. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net .