Economic Worries Weigh on Stocks

U.S. stocks fell Thursday as signs of housing-market weakness and worries about the outlook for interest rates made investors uneasy about prospects for consumer spending and corporate profits.

The Dow Jones industrial average was down 74.76 points, or 0.66 percent, at 11,331.44. The Standard & Poor's 500 Index was down 6.24 points, or 0.48 percent, at 1,294.02. The Nasdaq Composite Index was down 12.55 points, or 0.58 percent, at 2,155.29.

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Rate-sensitive financial shares such as Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM) were among some of the top drags on the S&P 500, after a Federal Reserve official said policy-makers must be biased toward further rate hikes.

The Nasdaq held up better than the other main indexes, as a gain in Apple Computer Inc. (AAPL) shares limited the drop.

Another batch of negative earnings news from several large home builders, including KB Home (KBH) and Beazer Homes USA Inc. (BZH) further soured the U.S. economic picture.

"We've got two more high-profile housing sector names cutting estimates," said Todd Clark, director of stock trading at Nollenberger Capital Partners in San Francisco. "That comes on the heels of not-so-great wage inflation yesterday and (signs of) slower growth."

Housing stocks themselves, however, rallied as some investors were tempted by their appealing valuations after a prolonged slump, with most builders' shares down more than 50 percent from their highs of the housing boom.

Stocks fell on Wednesday after news of an unexpectedly high rise in unit labor costs. On Thursday, San Francisco Fed President Janet Yellen said wage pressures were troubling her more now than when she last spoke publicly on July 31.

Apple rose 4 percent to $72.80 on Nasdaq after UBS raised its price target on the shares to $92 from $80. Investors expect the computer maker to soon launch a service that allows users to download feature-length films.

Beazer Homes shares ended down 2.7 percent at $37.33, and declined even more during the session to a 52-week low, after the company cut its fiscal 2006 forecast again on higher contract cancellations. KB Home shares ended little changed at $40.40 after cutting its profit forecast on declining orders.

Adding to pessimism about housing, the National Association of Realtors revised higher its estimate of the decline in sales of existing homes expected this year.

Boston Scientific Corp. (BSX) slid 3.3 percent to $16.70 after the company said an internal analysis of its clinical data confirmed an increased risk of blood clots with its drug-coated cardiac stent.

On the blue-chip Dow, Caterpillar Inc. (CAT) and Boeing Co. (BA) were among the top drags. Caterpillar shares fell 2 percent to $67.76 and Boeing's stock was down 2.1 percent at $72.87

Trading was moderate on the NYSE, with about 1.47 billion shares changing hands, below last year's daily average of 1.61 billion, while on Nasdaq, about 1.87 billion shares traded, above last year's daily average of 1.80 billion.

Declining stocks outnumbered advancing ones by a ratio of 2 to 1 on the NYSE and by 9 to 5 on Nasdaq.

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