Stocks knocked back

NEW YORK (CNNMoney.com) -- Stocks slumped Tuesday after a weak profit report from the nation's biggest homebuilder revived worries about the housing sector and a big drop in consumer confidence fed concerns about the broader economy.

The Dow Jones industrial average (down 71.78 to 12,397.29, Charts) and the broader S&P 500 (down 8.89 to 1,428.61, Charts) index both skidded around 0.6 percent. The Nasdaq (down 18.20 to 2,437.43, Charts) composite lost 0.7 percent.

"I think we're going to have a really soft environment for stocks until we get a sense of the earnings," said Dan Genter, president at RNC Genter Capital Management. "The market has no footing right now."

He said that on a broader level, investors are coming to terms with the fact that after hearing for three years that earnings growth is going to slow, earnings growth really is going to slow in 2007. In addition, he said that while he does not see the economy heading toward recession, growth is clearly slowing.

After the close, oil futures spiked more than $5 to over $68 a barrel in electronic trading on rumors that Iran had fired on U.S. Navy warships. However, prices soon pulled back to stand at about $64.50.

That set the price of oil at a six-month high and sent Nasdaq and S&P futures lower, suggesting a weaker start on Wall Street Wednesday.

Also in focus Wednesday: the February durable goods orders report, due before the start of trading and the latest from Ben Bernanke. The Federal Reserve chair is due to testify before the Joint Economic Committee on the U.S. economic outlook, starting at around 9:30 a.m. ET.

Stocks managed to end mixed Monday, as investors fought back at the end of a tough session when a weak reading on new home sales revived worries about housing as well as economic growth overall.

Such concerns remained in place Tuesday after No. 1 homebuilder Lennar (down $0.04 to $44.50, Charts) reported a big drop in quarterly profit and withdrew its 2007 forecast due to housing weakness and uncertainty over the subprime mortgage fallout.

Adding to the recent spate of weak economic reports was the March consumer confidence index, which sank to 107.2 from a downwardly revised 111.2 in February. Economists surveyed by Briefing.com thought it would fall to 109 in the month.

"I think one has to be careful not to read too much into these incremental changes in these reports," said Richard Hoyt, money manager at KDV Wealth Management. "We're at a point where bad news has twice the weight of good news, which is creating undue pessimism in the near term."

The week is a busy one for economic news. Reports due later in the week include the last revision to fourth-quarter GDP, personal income and spending, Chicago PMI, construction spending and University of Michigan consumer sentiment.

Blue-chip declines were broad based, with 25 out of 30 Dow issues declining, led by DuPont (down $1.55 to $49.81, Charts), General Motors (down $0.07 to $32.18, Charts) and Home Depot (down $0.57 to $37.34, Charts).

A number of big-name tech stocks slipped too, including Sun Microsystems (down $0.16 to $6.06, Charts), Microsoft (down $0.50 to $27.72, Charts) and Cisco (down $0.41 to $25.93, Charts).

On the upside, biotech Nuvelo (up $0.77 to $3.86, Charts) surged 25 percent in unusually active Nasdaq trading after the company's experimental colon cancer drug received "fast-track" status from regulators. The process can speed up the review of drug marketing applications.

Market breadth was negative. On the New York Stock Exchange, decliners topped advancers 11 to 5 on volume of 1.38 billion shares. On the Nasdaq, losers beat advancers two to one on volume of 1.75 billion shares.

In regular trading, crude oil for May delivery rose 2 cents to settle at $62.93 a barrel on the New York Mercantile Exchange after hitting a 2007 high Monday on heightened geopolitical fears.

COMEX gold for April delivery fell $1.40 to $662.50 an ounce.

Treasury prices crept lower, raising the yield on the 10-year note to about 4.61 percent from 4.60 percent late Monday. Bond prices and yields move in opposite directions.

In currency trading, the dollar fell versus the euro and the yen.

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