Drop in sales of big ticket items generates retreat on Wall Street

NEW YORK » Wall Street pulled back yesterday after a drop in February's durable goods orders injected more pessimism about the economy into the stock market.

Investors who have been worried about the financial health of U.S. companies and individuals were disappointed to see a 1.7 percent dip in last month's orders of durable goods, or big-ticket items that range from refrigerators to cars to computers. The Commerce Department's durable goods report is indicative of business spending and consumer demand, so two straight months of declines were worrisome to Wall Street.

Meanwhile, investors found another reason to be cautious after the Commerce Department said sales of new homes slumped in February. The 1.8 percent decline was a bit narrower than economists surveyed by Thomson Financial/IFR had anticipated, but it still dragged down sales for the fourth consecutive month to a 13-year low.

Considering that the Dow has added more than 425 points in the past three sessions, a pullback does not come as a surprise.

"I think the market has done a decent job of trying to find a bottom in the last few days, and that's certainly an encouraging sign," said David Joy, chief market strategist at Ameriprise Financial Inc.'s RiverSource Investments. "But I don't think there is by any means a general re-emergence of confidence in this market."

The economy continues to struggle with tumbling home prices and rising commodity costs; crude oil, for one, surged back above $105 a barrel yesterday.

The Dow fell 109.74, or 0.88 percent, to 12,422.86, after sinking as many as 155 points during trading.

Broader stock indicators also retreated. The Standard & Poor's 500 index fell 11.86, or 0.88 percent, to 1,341.13, while the Nasdaq composite index fell 16.69, or 0.71 percent, to 2,324.36. The Russell 2000 index of smaller companies fell 3.16, or 0.45 percent, to 702.11.

Declining issues led advancers by 5 to 3 on the New York Stock Exchange. Consolidated volume came to 3.85 billion shares, down from 3.99 billion Tuesday.

Government bond prices rose as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.46 percent from 3.51 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Oil prices soared after the Energy Department said the nation's inventory of crude oil, gasoline and distillate fuels was lower than expected last week. Light, sweet crude shot up $4.68 to finish at $105.90 a barrel on the New York Mercantile Exchange.

Financial stocks fell after Treasury Secretary Henry Paulson said the government should impose more regulation on the nation's investment banks. In a speech to the U.S. Chamber of Commerce, Paulson said the Bush administration will soon release a plan to promote a smoother functioning of financial markets.

In a sign of how bank woes are affecting companies outside the financial industry, private equity firms leading a $19.5 billion buyout of Clear Channel Communications Inc. were struggling to reach terms with the banks committed to financing the deal, according to the Wall Street Journal. Clear Channel fell $5.70, or nearly 17.5 percent, to $26.86.