Feb. 7 (Bloomberg) -- The Standard & Poor's 500 Index declined as homebuilders such as D.R. Horton Inc. dropped following a lower sales forecast from Toll Brothers Inc., the largest U.S. builder of luxury homes.

``Any kind of surprise is met immediately with selling,'' said Gerald Bollman, who helps oversee $1 billion at Great Companies LLC in Clearwater, Florida. ``Investors are punishing earnings shortfalls mercilessly. We aren't going to see the same profits as last year.''

The Dow Jones Industrial Average found support from Walt Disney Co. and Coca-Cola Co. after the companies reported profit that exceeded some analysts' estimates. General Motors Corp. declined after the world's No. 1 automaker agreed to cut its dividend in an effort to save more than $565 million a year.

The S&P 500 fell 4, or 0.3 percent, to 1261.02 as of 10:24 a.m. in New York. The Dow average slipped 4.09 to 10,794.18. The Nasdaq Composite Index lost 5.47, or 0.2 percent, to 2253.33.

The S&P 500 has retreated 2.6 percent from its 2006 peak reached Jan. 11, the week that Alcoa Inc. kicked off the fourth- quarter earnings season with a profit report that trailed analysts' estimates. Disappointing results since then from Intel Corp., Citigroup Inc., and Google Inc. have also weighed on the market, as has concern about inflation.

Analysts have reduced their first-quarter profit estimates for seven of the S&P 500's 10 industry groups over the past four weeks, according to a Bloomberg analysis of Thomson Financial data.

For all S&P 500 companies, analysts predict earnings will grow 9.8 percent in the first quarter. If their forecasts are accurate, a streak of 10 percent-plus increases since the third quarter of 2003 would be snapped.

Toll Brothers

Toll Brothers tumbled $1.05 to $30.15. The company expects to sell 9,200 to 9,900 homes in fiscal 2006, down from a previous forecast of 9,500 to 10,200. Last year, it delivered 8,769 homes. Orders for new homes plunged 29 percent in the first quarter ended Jan. 31.

D.R. Horton, the largest U.S. homebuilder, slid 94 cents to $34.01 and Pulte Homes Inc., the No. 2 U.S. homebuilder, fell 64 cents to $37.30. An S&P index of homebuilders lost 2.1 percent.

Disney climbed 81 cents, or 3.3 percent, to $25.77 for the top gain in the Dow average. The No. 2 U.S. media company earned 35 cents a share, excluding a gain, in the fiscal first quarter. That beat the 31-cent estimate from Merrill Lynch & Co. analyst Jessica Reif Cohen. Disney also agreed to merge its ABC radio network and 22 stations with Citadel Broadcasting Corp. in a transaction valued at $2.7 billion.

Coca-Cola, the world's largest maker of soft drinks, rose 37 cents to $41.31. Excluding some items, Coca-Cola said fourth- quarter profit was 46 cents a share. The average analyst estimate in a Thomson survey was 45 cents.

GM

GM lost 20 cents to $23.14. Bowing to pressure from investors led by billionaire Kirk Kerkorian, the company said it would cut its 50-cents-a-share quarterly dividend by half. It will also slash pay for its top executives, including a 50 percent reduction for Chief Executive Officer Rick Wagoner. Last year, GM shares lost almost 52 percent, the worst performance of the 30 members in the Dow average.

``Anything that staves off bankruptcy is good,'' Bollman said. ``Whether GM can recover its former dominance is another question.''

About five stocks fell for every four that rose on the New York Stock Exchange. Some 311 million shares changed hands on the Big Board, 4.2 percent less than the same time a week ago.

Cisco

Cisco Systems Inc., the biggest maker of equipment that directs Internet traffic, added 18 cents to $18.01. The company will probably report that second-quarter revenue rose at the slowest pace in more than two years.

Sales likely gained 9.1 percent to $6.61 billion, according to estimates by JPMorgan Chase & Co.'s Ehud Gelblum. That's down from 9.7 percent in the previous quarter and 12 percent a year earlier. Profit likely rose to 25 cents a share, from 21 cents, excluding some costs, Gelblum said.

Activision Inc., the No. 2 U.S. video-game maker, lost 28 cents to $14.08. The company said third-quarter net income fell as new titles including the combat game ``Call of Duty 2'' failed to counter rising costs. Profit dropped to 23 cents a share. Analysts predicted 36 cents, according to Thomson, which doesn't say what costs may be excluded from the estimates.

Yum! Brands Inc. added 47 cents to $51.64. The operator of the Taco Bell, KFC and Pizza Hut chains said fourth-quarter profit, excluding some items, was 81 cents a share, beating the 78 cents analysts expected, according to Thomson.