NEW YORK — Investors dumped stocks after an unexpected drop in home sales and a slide in oil prices fanned worries Thursday about the pace of the economy's recovery.
Stocks fell for a second day after the National Association of Realtors said sales of existing homes dropped 2.7 percent in August after jumping 7.2 percent in July. Economists had expected sales would post their fifth straight monthly increase.
The Dow Jones industrial average ended with a loss of 41 points to bring its two-day drop to 122 points.
The market climbed in morning trading after a surprise drop in the number of people seeking unemployment benefits. The housing numbers upended that advance, however, and stocks never recovered.
Financial stocks and home builders also lost ground after the housing numbers.
A stronger dollar weighed on the market by pushing commodity prices lower. That hit stocks of energy and materials companies.
The retreat came a day after investors looked past a more upbeat assessment of the economy from the Federal Reserve and worried about what will happen once the government starts to wind down its economic stimulus efforts.
"We know what the data looked like with the economy on life support," said Stephen Wood, chief market strategist at Russell Investments. "What the market is beginning to price is what will the data look like when the Fed starts withdrawing that life support and that is not nearly as clear."
The Dow fell 41.11, or 0.4 percent, to 9,707.44. The index fell Wednesday as investors worried about how quickly the Fed would rein in some of its supports for the economy. The Dow is now down about 300 points from the psychological benchmark of 10,000, a level it fell below nearly a year ago.
The S&P 500 index fell 10.09, or 1.0 percent, to 1,050.78, and the Nasdaq composite index fell 23.81, or 1.1 percent, to 2,107.61.
Three stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 5.64 billion shares, compared with 5.58 billion Wednesday.
"Basically, after the [Fed] meeting, investors took that as an excuse to take some profits," said Carmine Grigoli, chief U.S. investment strategist at Mizuho Securities in New York.
The housing data and falling commodities overshadowed the Labor Department's report that the number of newly laid off workers seeking unemployment benefits fell for a third week in a row. Initial claims for unemployment insurance fell by 21,000 last week to 530,000. Economists had been expecting an increase.
Gold ended below $1,000 for the first time in two weeks. Silver also posted a big drop.
Bond prices rose, pushing yields higher. The yield on the benchmark 10-year Treasury note fell to 3.38 percent from 3.43 percent late Wednesday.
The Russell 2000 index of smaller companies fell 11.62, or 1.9 percent, to 601.75.
Business, Pages 32 on 09/25/2009