Bloomberg News — Stocks fell, trimming the biggest September rally since 1939, as investors sold some of the month’s best-performing shares amid speculation that improving economic data will reduce the need for the Federal Reserve to stimulate growth.

Caterpillar Inc., which has rallied 21 percent in September for the top gain in the Dow Jones Industrial Average, fell 1.6 percent to lead the 30-stock gauge lower today along with biggest decliner American Express Co., which fell 2.4 percent. Apple Inc., up 17 percent this month, slumped 1.3 percent. Occidental Petroleum Corp. gained 2.2 percent, leading a measure of energy stocks to the only rise among 10 groups in the Standard & Poor’s 500 Index.

The Standard & Poor’s 500 Index slipped 0.3 percent to 1,141.20 at 4 p.m. in New York, trimming its monthly advance to 8.8 percent and its third-quarter gain to 11 percent. The Dow slid 47.23 points, or 0.4 percent, to 10,788.05.

“Things were due for a pause, this being the last day of the quarter,” said Michael James, a managing director at Wedbush Morgan Securities in Los Angeles. “Nothing goes up in a straight line,” he said. “We’ve had a hard time making an attempt at higher highs. You’re seeing traders exit positions and lock in gains for the quarter.”

All 10 industry groups in the S&P 500 and all 30 stocks in the Dow have gained in September, turning both measures positive for 2010, amid speculation the world’s largest economy will avoid slipping back into a recession and bets that the Federal Reserve will buy more debt to support the recovery.

Profit Taking’

Even after the rally, the S&P 500’s valuation of 12.5 times projected earnings over the next 12 months compares with a 16.5 average since 1954 using reported results, according to data compiled by Bloomberg.