NEW YORK – Stocks fell Tuesday as existing home sales dropped and volatile crude oil prices rekindled investors' worries about a slowdown in consumer spending and corporate profits.
The Dow Jones industrial average (search) slid 50.31 points, or 0.48 percent, to end at 10,519.58. The Standard & Poor's 500 index (search) dropped 4.14 points, or 0.34 percent, to finish at 1,217.59. And the technology-laced Nasdaq Composite Index (search) fell 4.16 points, or 0.19 percent, to 2,137.25.
"Stocks have been losing steam as a result of higher rates and higher energy prices," said Carl Birkelbach, president of Birkelbach Management Corp. in Chicago, with $200 million in stocks. "We could see a continued correction in prices from now until the next earnings season."
Investors sold off stocks in early trading and continued selling after the National Association of Realtors (search) said sales of previously owned homes dropped 2.6 percent in July as mortgage rates crept up. But even with the decline, sales were the third-highest level on record.
The latest snapshot of housing activity suggested that the sizzling housing market may be cooling a bit but nonetheless remains healthy. Wall Street has been closely watching home sales, worried that the housing boom is nearing its end. Jobs in the construction and at home improvement retailers would be affected by a contraction and consumer spending could take a hit if home prices decline, since a raft of home equity loans have put cash in consumers' pockets.
"We're not seeing a lot of conviction, either by buyers or sellers, so far this week," Sheldon said. Of the 10 sectors in the Standard & Poor's 500, only one, the materials sector, moved a shade more than 1 percent.
Shares of industrial companies, which are considered benchmarks of the U.S. economy, fell. Diversified manufacturer 3M Co. (MMM) was off nearly 1 percent to $71.32, making it one of the heaviest drags on the blue-chip Dow average.
Traders also worried as oil prices first rose, then fell. The volatility did not please equity investors, who are concerned that higher gasoline prices are curbing consumer spending. On Saturday, Wal-Mart Stores Inc., the world's largest retailer, said its third-quarter results would miss analysts' expectations due to rising oil prices. A barrel of light crude settled at $65.71, up 6 cents, on the New York Mercantile Exchange (search).
"We started the year at $42 a barrel oil_ that was a concern, but we could get past it," said David Sowerby, chief market analyst, Loomis, Sayles & Co. "When we crossed $60, I don't think anyone could question what $60 is going to do to retail sales."
Oil companies' shares slipped in sync with crude futures declining from the session high. Exxon Mobil Corp. (XOM) dipped 0.1 percent, or 7 cents, to $59, off its intraday low of $58.39. ConocoPhillips (COP) dropped 0.8 percent, or 53 cents, to $62.68, and Chevron Corp. (CVX) fell 0.5 percent, or 27 cents, to $60.07.
Shares in Citigroup (C), the world's largest financial institution, dropped 1.5 percent to $43.56, while the Philadelphia KBW Bank Index fell 0.9 percent. Citigroup, a Dow component, also fell as the company said Marjorie Magner, its consumer banking chief, will leave.
Shares of other U.S. banks, including Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC), fell. Bank of America lost 0.9 percent, or 40 cents, to $43.34, and Wells Fargo declined 1 percent, or 62 cents, to $60.05. Earlier this month, the Federal Reserve raised the benchmark lending rate to 3.5 percent.
Merck & Co. (MRK) continued to fall, dropping 31 cents to $27.58 after Friday's $253.4 million verdict against the company in the first of 4,200 suits claiming Merck knew of problems with its
Vioxx painkiller long before it pulled the drug from the market in September.
Furniture maker and retailer La-Z-Boy Inc.'s (LZB) stock slid 3 percent, or 42 cents, to $13.57 on the NYSE after the company said higher energy prices were contributing to weak furniture demand .
Shares of the No. 2 home builder Pulte Homes Inc. (PHI) fell 0.8 percent, or 68 cents, to $83.48, and No. 3 Lennar Corp. fell 1.3 percent, or 79 cents, to $58.93, both on the New York Stock Exchange.
"Earlier this year, home-builder stocks were going up like Superman," said Al Goldman, a chief market strategist at A.G. Edwards in St. Louis. "Today's drop in the home sales report provided a good excuse for managers to finally sell those stocks and lock in some profits."
Discount retail chain Target Corp. (TGT) fell 4 cents to $56.10 after it said August sales in stores open at least one year — a key performance gauge known as same-store sales — would hit the high end of a projected range of 4 percent to 6 percent. In the year-ago period, Target's same-store sales rose 1.8 percent.
Trading was moderate on the New York Stock Exchange, where decliners beat advancers by a ratio of about 5 to 4, with about 1.28 billion shares changing hands, down from the 1.46 billion daily average for last year.
On Nasdaq, decliners also outnumbered advancers by a ratio of about 5 to 4, with about 1.38 billion shares changing hands, down from the 1.81 billion daily average last year.
The Russell 2000 index of smaller companies fell 2.00, or 0.3 percent, to 655.47.
Overseas, Japan's Nikkei stock average rose 0.16 percent. Britain's FTSE 100 fell 0.34 percent, Germany's DAX index dropped 0.48 percent, and France's CAC-40 slipped 1.10 percent.
Reuters and the Associated Press contributed to this report.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox