Stocks slide as new home sales fall

NEW YORK — Signs of a weaker housing market gave stock investors another reason to be cautious.

Stocks fell Wednesday after the Commerce Department said new home sales dropped for the first time in five months. Sales slid 3.6 percent in September to 402,000 from 417,000 in August, well below the 440,000 analysts had forecast.

Investors also pulled back after Goldman Sachs Group Inc. reduced its expectation for the nation's economic output for the July-September period. Goldman Sachs expects third-quarter gross domestic product rose at an annual rate of 2.7 percent, weaker than its earlier forecast of 3 percent.

The government's report on third-quarter GDP is due Thursday morning.

Analysts said the market's slide in the past week isn't surprising given the size of the advance in the past eight months and only mixed economic readings.

"I'm not panicked at the moment," said Manny Weintraub, president of Integre Advisors in New York. "I don't think anyone expected a super robust recovery."

In midafternoon trading, the Dow Jones industrial average fell 67.34, or 0.7 percent, to 9,814.83.

The broader Standard & Poor's 500 index fell for the fourth straight day, sliding 13.88, or 1.3 percent, to 1,049.53. The Nasdaq composite index fell 40.40, or 1.9 percent, to 2,075.69.

In another sign of lingering troubles in the financial industry, GMAC Financial Services is in talks with the Treasury Department for a third bailout. The auto and mortgage lender has been among the hardest hit financial firms by rising loan defaults and troubled credit markets. The government already holds a 35 percent stake in GMAC after giving it $12.5 billion in bailout money.

Stocks struggled Tuesday after a disappointing report on consumer confidence stirred worries about the strength of the coming holiday shopping period. Corporate profits have been improving but investors are still waiting for a rebound in sales.

Stocks have been falling most days since hitting their highest levels in a year at the start of last week. A strengthening dollar and falling commodities prices have at times weighed on stocks.

The dollar rose against most other major currencies, while gold prices fell.

Bond prices rose as investors sought safety from a falling stock market. That sent yields lower. The yield on the benchmark 10-year Treasury note fell to 3.41 percent from 3.45 percent late Tuesday.

Crude oil fell $2.08 to $77.47 per barrel on the New York Mercantile Exchange. The drop in oil weighed on shares of energy companies.

Oilfield services company Schlumberger Ltd. fell $2.05, or 3.2 percent, to $62.88.

Home builders fell after the report on new home sales. Hovnanian Enterprises Inc. slid 37 cents, or 8.6 percent, to $3.93. Toll Brothers Inc. fell 66 cents, or 3.7 percent, to $17.28.

The drop in new home sales follows a report from the National Association of Realtors last week that sales of existing home sales posted the biggest increase in 26 years in September as investors tried to get ahead of an expiring tax credit for first-time buyers. New home sales make up a smaller part of overall sales than sales of existing homes.

Earnings reports also touched off some worries. Goodyear Tire & Rubber Co.'s profit more than doubled in the third quarter as it cut costs and added products, but the company also said it expects operating income will fall in North America in the fourth quarter. The stock fell $3.41, or 20.4 percent, to $13.33.

Drug distributor McKesson Corp. fell $1.57, or 2.6 percent, to $58.05 after the company's fiscal second-quarter earnings fell short of analysts' expectations.

Apollo Group Inc., parent of the University of Phoenix, fell after the for-profit higher education company said the Securities and Exchange Commission had launched an informal inquiry into how it accounts for revenue. The stock fell $12.93, or 17.7 percent, to $60.04.

Five stocks fell for every one that rose on the New York Stock Exchange, where volume came to 975.7 million shares compared with 814.4 million shares traded at the same point Tuesday.

The Russell 2000 index of smaller companies fell 13.28, or 2.3 percent, to 573.71.

Overseas, Britain's FTSE 100 fell 2.3 percent, Germany's DAX index fell 2.5 percent, and France's CAC-40 slid 2.1 percent. Japan's Nikkei stock average fell 1.4 percent.

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