Stocks slide as new home sales post surprise drop of 3.6 percent for September

Stocks turn lower 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 fell 3.6 percent in September to 402,000 from 417,000 in August, well below the 440,000 analysts had forecast. It was the first drop since March.

An earlier report showed orders for big-ticket manufactured goods rose in line with expectations last month. It was the fourth gain in six months.

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. That’s weaker than its earlier forecast of 3 percent.

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. I don’t think anyone expected a super robust recovery,” said Manny Weintraub, president of Integre Advisors in New York.

In midday trading, the Dow Jones industrial average fell 36.88, or 0.4 percent, to 9,845.29. The Standard & Poor’s 500 index fell 10.48, or 1 percent, to 1,052.93, while the Nasdaq composite index fell 29.82, or 1.4 percent, to 2,086.27.

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.

The Dow was able to eke out a small gain because of strength at IBM Corp. and rising energy stocks. However, the S&P and Nasdaq both fell Tuesday.

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 Wednesday, while gold prices fell.

Bond prices rose, sending yields lower. The yield on the benchmark 10-year Treasury note fell to 3.42 percent from 3.45 percent late Tuesday.

Crude oil fell $1.68 to $77.87 per barrel on the New York Mercantile Exchange. The drop in oil weighed on shares of energy companies.

Oilfield services company Schlumberger Ltd. fell $1.48, or 2.3 percent, to $63.45.

Three stocks fell for every one that rose on the New York Stock Exchange, where volume came to 657 million shares compared with 545.8 million shares.

The Russell 2000 index of smaller companies fell 9.84, or 1.7 percent, to 577.15.

Overseas, Japan’s Nikkei stock average fell 1.4 percent. In afternoon trading, Britain’s FTSE 100 fell 2 percent, Germany’s DAX index fell 2 percent, and France’s CAC-40 slid 1.9 percent.