Wall Street's tough day

NEW YORK (CNNMoney.com) -- Stocks tumbled Wednesday, as investors eyed reports showing slumping pending home sales, anemic private sector employment and the latest woes for the financial sector.

Also dragging on stocks: the afternoon release of the Federal Reserve's 'beige book' report on the economy, which added to confusion about whether the central bank will cut short-term interest rates anytime soon.

The Dow Jones industrial average (down 138.68 to 13,310.18, Charts) lost 143 points, or almost 1.1 percent, according to early tallies. The broader S&P 500 (down 17.60 to 1,471.82, Charts) index fell 1.2 percent. The Nasdaq Composite (down 24.29 to 2,605.95, Charts) lost 0.9 percent.

Treasury bond prices jumped, lowering the corresponding yields, as investors sought the relatively-safer-haven investments. Oil prices rose.

Here's a look at what was happening near the close.

Stocks rose Tuesday as investors welcomed upbeat economic news and continued to bet that the Federal Reserve will cut interest rates if necessary when it meets later this month. Such bets fueled a big rally at the end of last week.

But the advance petered out Wednesday following a weak July pending home sales report, a surprisingly tepid employment reading and signs of more problems for the credit and mortgage markets.

The afternoon release of the Fed's periodic 'beige book' report on the economy added to the day's weakness, said Tom Schrader, managing director of U.S. equity trading at Legg Mason.

Released at around 2:00 p.m. ET, the 'beige book' showed that the economy continued to grow throughout August, although tighter credit requirements hurt the housing market.

Wall Streeters didn't like the report, Schrader said, because they are interpreting it as implying that the central bank may not see a need for an interest rate cut at the Sept. 18 policy meeting, since growth seems to be holding up.

"I think we're probably in for another few weeks of choppy market action," Schrader said. "We've got to get through the September Fed meeting first before stocks can really make an attempt to move higher."

The pending home sales index, a measure of contracts to buy existing homes, fell to its lowest level since the month that included the Sept. 11, 2001 terrorist attacks, a trade group reported Wednesday.

Also weighing on stocks: the ADP employment report, which showed surprisingly weak growth in private sector jobs in August. The report could be a negative indication for the broader August employment report, expected Friday morning.

Homebuilder stocks fell on the pending home sales index - and in response to a dour analyst note from J.P. Morgan Securities, which said that a Fed interest rate cut may not help the sector.

Toll Brothers (down $0.65 to $21.19, Charts, Fortune 500), Centex (down $1.16 to $27.96, Charts, Fortune 500) and Hovnanian (down $0.73 to $11.87, Charts, Fortune 500) were among the home building stocks on the slide.

Financial stocks slipped on continued worries about the sector's vulnerability amid tightening credit and ongoing problems in the mortgage market.

In the latest hit, Citigroup (down $1.16 to $46.05, Charts, Fortune 500) and other large banks could be the latest in the sector at risk to lose billions due to their exposure to short term loans known as commercial paper, that are offered by "conduits," the Wall Street Journal reported.

Conduits and structured investment vehicles (SIVs) are set up by banks to operate off their balance sheets. However, recent market turmoil has raised worries that the banks may be forced to step in, the Journal said.

Apple (down $7.40 to $136.76, Charts, Fortune 500) shares slipped after the company unveiled its new iPod music player, as well as other upgrades to its iPod lineup. The stock had already been active ahead of the widely-anticipated announcement.

Mattel (up $0.00 to $21.97, Charts, Fortune 500) shares slipped after the consumer products firm announced its third toy recall this summer, due to excessive levels of lead paint found in its Chinese-manufactured toys.

In other news, Home Depot (up $0.18 to $36.54, Charts, Fortune 500)'s CEO said that the weakness in the housing and mortgage markets will continue to hurt its business through 2008. The stock fell in the morning, but recovered in the afternoon.

Stock declines were broad, with 29 of 30 Dow components falling, led by American Express (down $1.48 to $59.29, Charts, Fortune 500), General Motors (down $0.82 to $31.10, Charts, Fortune 500) and Verizon Communications (down $0.68 to $41.99, Charts, Fortune 500).

On the upside, Forest Labs (up $3.57 to $41.45, Charts) jumped 8.4 percent in active New York Stock Exchange trade on positive court ruling, Reuters reported. A U.S. appeals court upheld the patent on Forest's key depression drug Lexapro, and confirmed a lower court decision to block the sale of a generic form of the drug.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by more than 3 to 1 on volume of 1.25 billion shares. On the Nasdaq, decliners topped advancers 2 to 1 on volume of 1.62 billion shares.

Treasury prices rose in a classic 'flight-to-quality' move, lowering the yield on the 10-year note to 4.47 percent from 4.54 percent late Tuesday. Bond prices and yields move in opposite directions.

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

U.S. light crude oil for October delivery rose 65 cents to $75.73 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery fell 80 cents to $690.70 an ounce.