Dow tumbles 275 as home sales drop
NEW YORK » Wall Street abruptly ended an earnings-driven rally and closed sharply lower yesterday after a steeper-than-expected decline in existing home sales and worries about the financial sector chilled the market's recent optimism. The major indexes fell about 2 percent, including the Dow Jones industrial average, which lost more than 275 points.
The National Association of Realtors said sales resumed their decline in June after a slight rebound in May. Existing home sales declined by 2.6 percent, well beyond the 1 percent drop economists had forecast.
Investors punished shares of homebuilders and financial companies yesterday because both sectors have struggled with the declining housing market.
Alan Lancz, director at investment research group LanczGlobal, said investors are concluding that while financials had been oversold and were due for a rebound, problems remain with tight credit and souring mortgage debt.
The Dow fell 283.10, or 2.43 percent, to 11,349.28. It was the biggest decline for the Dow since June 26.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 29.65, or 2.31 percent, to 1,252.54. A jump in Amazon.com Inc. shares helped contain some of the decline in the technology-heavy Nasdaq composite index, which fell 45.77, or 1.97 percent, to 2,280.11.
Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where volume came to 1.65 billion shares compared with 1.72 billion shares traded Wednesday.
The Russell 2000 index of smaller companies fell 16.80, or 2.34 percent, to 702.39.
Stocks had risen in the prior two sessions as the price of oil declined. Oil is now down more than $20 after just weeks ago hitting a record above $147 a barrel. A barrel of light, sweet crude rose $1.05 yesterday to settle at $125.49 on the New York Mercantile Exchange.
Bond prices jumped yesterday as some investors looked for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.02 percent from 4.12 percent from late Wednesday.
The dollar was mixed against other major currencies, while gold prices rose.
Financial stocks declined again yesterday after rising sharply in the past week from their recent lows.
Washington Mutual Inc. fell 62 cents, or 13 percent, to $4.03 after falling 20 percent Wednesday as concerns persisted about the company's mortgage portfolio. The nation's largest thrift this week posted a $3 billion loss due to increases in its loss reserves to cover souring loans in its mortgage holdings.
Other financials lost ground. Citigroup Inc. fell $2.06, or 9.8 percent, to $19.06, while Merrill Lynch & Co. fell $4.77, or 14 percent, to $29.04. Wachovia Corp. declined $1.96, or 11 percent, to $15.69.