Drop in Home Sales, Tumbling Oil Weigh on Stocks

Investors pulled away from stocks after an unexpected drop in home sales and a slide in oil prices fanned worries about the pace of the economy's recovery.

Richard Genna, left, of Goldman Sachs directs trading for the initial public offering (IPO) of Artio Global Investors on the floor of the New York Stock Exchange, Thursday, Sept. 24, 2009, in New York. (AP Photo/Henny Ray Abrams)

(AP)

Stocks fell for a second day Thursday 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 market climbed in morning trading following a surprise drop in the number of people seeking unemployment benefits. The housing numbers upended that advance, however, and stocks never recovered. The Dow Jones industrial average ended with a loss of 41 points to bring its two-day drop to 122 points.

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.

Technology shares could see pressure Friday following disappointing quarterly results from BlackBerry maker Research In Motion Ltd. The company warned that revenue for the current quarter will fall short of analysts' expectations. The stock fell 9 percent in after-market electronic trading.

Thursday's 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.

The Fed said on Wednesday it would slow its purchases of mortgage-backed securities to extend the program into early next year. A first-time home buyer's credit is set to expire in November. Then, on Thursday, the Fed said it would reduce two emergency lending programs. One is for short-term loans to banks, while the other allows investment firms to temporarily swap risky securities for safe Treasurys.

"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."