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NEW YORK (CNN/Money) -
Stocks ended lower Tuesday after a bigger-than-expected drop in home sales raised concerns about consumer spending and the outlook for the economy.
The Dow Jones industrial average (down 50.31 to 10,519.58, Charts) lost about 0.5 percent, the broader Standard & Poor's 500 (down 4.14 to 1,217.59, Charts) dipped 0.3 percent and the tech-heavy Nasdaq composite (down 4.16 to 2,137.25, Charts) was down a few points late in the session.
All three indexes had been weaker earlier in the session.
As of 6:00 p.m. EST, Nasdaq and S&P 500 futures pointed to a lower open for the stock market Wednesday, when fair value is taken into account.
"We are in the summer doldrums," said Michelle Clayman, chief investment officer at New Amsterdam Partners. "Once we get into September, markets will probably rally because the fundamentals are strong but August tends to be a time of light trading."
Stocks dipped after the National Association of Realtors said existing home sales fell 2.6 percent in July from a record pace in June. Economists surveyed by Briefing.com had forecast a smaller decline.
Economists have worried that the housing boom is nearing its end, and the drop in existing home sales, by far the biggest part of the housing market, also sparked worries that construction companies and home improvement retailers could see business slide.
But Michael Darda, Chief Economist at MKM Partners, said that while the big gains in the housing market are probably over, Tuesday's housing news had an exaggerated effect on the market because of the lack of other economic news.
Home building stocks fell, with Lennar (down $0.79 to $58.93, Research) and KB Home (down $1.25 to $70.96, Research) both down nearly 2 percent. Centex (down $0.74 to $65.57, Research), DR Horton (down $0.15 to $34.92, Research) and Pulte Homes (down $0.68 to $83.48, Research) all sank around 1 percent. The stocks have had huge run ups during the nation's housing boom.
Investors are also looking ahead to Wednesday, when the July new home sales report will be released, and keeping a wary eye on oil prices, as rising crude futures have suppressed gains in recent sessions.
The October light crude futures contract closed at $65.71 a barrel, up 6 cents, after falling as low as $64.65 on the New York Mercantile Exchange.
Several oil companies' shares slipped, with Exxon Mobil (down $0.07 to $59.00, Research), BP (down $0.58 to $67.12, Research) and Chevron (down $0.27 to $60.07, Research) all lower in afternoon trading, although the energy sector is still one of the best performing this year, up about 26 percent year-to-date.
On the move
After the closing bell, shares of Applebee's International (Research) fell over 4 percent on the Inet electronic brokerage after the restaurant chain that its same-store sales increased 1.3 percent for the four-week period ended August 21.
Wind River (Research) posted higher second-quarter earnings after the bell, but issued a tepid third-quarter outlook and shares fell over 4 percent in after-hours trading.
And Key Tronic (Research) reported an increase in fourth-quarter earnings after the closing bell sending shares up 35 percent after hours.
In regular trading, Dow component Citigroup (down $0.64 to $43.56, Research) slid 1.4 percent as investors digested news that global consumer group chairman and CEO Marjorie Magner has quit. Magner was named the most powerful woman in the industry by U.S. Banker magazine in September 2004.
Shares of other banks, including Bank of America (down $0.40 to $43.34, Research), Washington Mutual (down $0.10 to $42.06, Research), US Bancorp (down $0.33 to $29.73, Research) and Wells Fargo & Co. (down $0.62 to $60.05, Research) were also lower in the session.
Alcoa (down $0.68 to $27.68, Research), Intel (down $0.34 to $25.72, Research), Johnson & Johnson (down $0.74 to $62.76, Research) and Merck (down $0.31 to $27.58, Research) also weighed on the Dow.
Wachovia (Research) shares edged lower after a published report said the bank is one of a handful of companies exploring a deal for the auto-finance firm WFS Financial (Research), meanwhile WFS shares soared nearly 16 percent.
Boston Scientific (down $1.23 to $25.92, Research) shares fell over 4 percent in afternoon trading after the Food and Drug Administration said the medical device maker's distribution process had "serious" problems that allowed flawed medical devices to be shipped.
On the upside, Amylin Pharmaceuticals (up $6.07 to $28.00, Research) surged more than 27 percent after the drug maker said a more convenient form of its new diabetes drug showed positive results and weight loss in a small midstage study.
Shares of development partners Eli Lilly (up $1.01 to $53.72, Research) and Alkermes (up $1.84 to $17.67, Research) also got a boost from the news.
Carmax (up $3.39 to $32.06, Research) stock jumped nearly 12 percent after the auto dealer raised its earnings outlook for the second quarter, citing better-than-expected sales and showroom traffic.
And the tech sector got a small lift from Lucent (up $0.11 to $2.98, Research), which added close to 4 percent in afternoon trading. Prudential Equity Group upgraded the telecom equipment maker to "overweight" from "neutral weight," forecasting higher earnings in the fourth quarter of 2005 and the first quarter of 2006.
Among retailers, Pier 1 Imports (down $0.50 to $13.36, Research) cut its second-quarter outlook due to declining customer traffic in August, and said same-store sales are expected to fall. Shares slid nearly 5 percent but rose almost 4 percent in extended trading on the Inet electronic brokerage.
Williams-Sonoma (down $0.44 to $40.29, Research) shares fell after the home furnishings retailer said second-quarter profit met Wall Street forecasts at 26 cents a share, but that revenue was came in slightly lower than forecast. The company, which also owns Pottery Barn, also reaffirmed its third-quarter and full-year earnings targets.
La-Z-Boy (down $0.42 to $13.57, Research) shares slumped 3 percent after the furniture maker and retailer said higher energy prices were contributing to weak furniture demand.
Market breadth was negative. Losers beat out winners on the New York Stock Exchange as 1.3 billion shares changed hands. Decliners narrowly topped advancers on the Nasdaq as 1.4 billion shares were traded.
Volume is typically lower in August, which can make for exaggerated trading moves.
Bond prices rose on the home sales report, pushing the yield on the 10-year treasury down to 4.17 percent, near the lowest level in a month, from 4.21 percent Monday.
The dollar edged higher against the euro and the yen.
COMEX gold gained $1.30 to $444.30.
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