Fed and home data prompt stock sell-off

NEW YORK » Stocks finished sharply lower yesterday as a jittery Wall Street sold off on a report showing a large drop in pending home sales and read anecdotal data from the Federal Reserve's regional banks as offering little more assurance that an interest rate cut is likely.

Bond prices soared as investors again sought the safety of government debt, sending yields to multi-month lows. The yield on the 10-year Treasury note, which moves inversely to its price, fell to 4.47 percent, its weakest level since March 14, and down from 4.56 percent at Tuesday's close.

The National Association of Realtors said pending sales of existing homes fell in July to the lowest level in nearly six years. Though the report did support the argument for a rate cut, it also worried investors who are nervous about the housing market growing so weak that it drags the economy into recession.

The Fed's Beige Book, which describes economic conditions in regions around the country, said that while upheaval in the financial markets has made the housing slump worse, the overall economy hasn't been widely harmed. Wall Street appeared disappointed that the Beige Book's findings didn't deliver a sure-bet for a rate cut.

"The markets are reacting to absolutely every bit of information which is coming along tick by tick," said Walter Gerasimowicz, chairman and chief executive of Meditron Asset Management in New York, downplaying the market's initial pullback after release of the Beige Book as an overreaction. "I'm happy to see that the underlying economy is still in fairly sound mode."

The Dow ended down 143.39, or 1.07 percent, at 13,305.47, after having fallen as much as 200 points in the session.

Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 17.13, or 1.15 percent, to 1,472.29, and the Nasdaq composite index fell 24.29, or 0.92 percent, to 2,605.95.

The Russell 2000 index of smaller companies fell 10.23, or 1.28 percent, to 790.46.

Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.39 billion shares compared with 1.37 billion shares traded Tuesday.

Crude futures rose 65 cents to settle at $75.73 per barrel on the New York Mercantile Exchange.

In corporate news, Mattel Inc. announced a third major recall of Chinese-made toys in little more than a month because of excessive amounts of lead paint. The world's largest toy maker said the move affects about 800,000 toys. Mattel rose 1 cent to $21.98.

Apple Inc. fell $7.40, or 5.1 percent, to $136.76 after investors were disappointed about newly announced versions of the company's iPod digital media players.

Costco Wholesale Corp., the warehouse retailer, fell $2.61, or 4.2 percent, to $59 after reporting its August same-store sales rose a weaker-than- expected 2 percent largely due to strong international sales. Same-store sales, or sales at stores open at least a year, are a widely followed indicator of retail health.

Most major retailers will be reporting August sales today.