Oil, housing worries send stocks lower

NEW YORK (CNNMoney.com) -- Major gauges were poised to finish lower for the second straight day Tuesday as oil prices soared above $88 a barrel and more housing market woes kept stocks under pressure.

The Dow Jones industrial average (Charts) fell about 0.6 percent with an hour remaining in the session.

The broader S&P 500 index (Charts) lost nearly 0.7 percent, while the tech-fueled Nasdaq (Charts) eased about 0.5 percent.

Pressuring stocks were higher oil prices, which jumped above $88 a barrel, before paring some gains. Light, sweet crude for November was $1.39 higher at $87.51 a barrel in afternoon trade on the New York Mercantile Exchange.

"Oil moving up here is one thing that has gotten a lot of attention from portfolio managers with it getting close to $90 a barrel," said Todd Leone, head of listed trading at Cowen & Co. "Inflation could be a problem and that could hurt the economy."

Wall Street was also troubled by more negative news from the housing sector.

The National Association of Home Builders reported that its monthly survey of builder confidence fell to its worst reading on record during October, while the outlook for the future also remained at a record low.

That report came just after Federal Reserve Chairman Ben Bernanke warned in a speech Monday night that weakness in the housing market would likely drag on growth through early next year.

Treasury Secretary Henry Paulson offered his take on the housing market Tuesday, warning that current housing crisis posed a risk to the larger economy, but did not warrant a bailout.

Investors also failed to find much encouraging news among the companies reporting third-quarter earnings Tuesday.

Among the hardest hit was wireless networks maker LM Ericsson (Charts), which warned that its third-quarter sales, operating income and cash flow all would be lower than expected. Shares of the LM Ericsson tumbled nearly 24 percent in afternoon trade on the news.

Wells Fargo (Charts, Fortune 500) reported slightly higher earnings despite taking a writedown totaling nearly $500 million over mortgages that had lost value.

Genentech (Charts) reported higher profits late Monday, but shares of the biotech firm lost 3.7 percent as revenue growth missed forecasts.

Investors were also eagerly awaiting results from a number of tech leaders including Yahoo (Charts, Fortune 500), Intel (Charts, Fortune 500) and IBM (Charts, Fortune 500) who were all set to deliver their quarterly results after the closing bell.

In other corporate news, shares of newspaper publisher E.W. Scripps (Charts) surged nearly 9 percent in afternoon trade after the company said it would split into two companies, with its new firm controlling its cable TV and Internet holdings.

Homebuilder D.R. Horton (Charts, Fortune 500) said Tuesday its orders tumbled 39 percent during the fourth quarter, hurt by the deepening housing slump.

Shares of Bear Stearns (Charts, Fortune 500) were over 2 percent higher following reports that China Citic Bank is bidding for a stake in the battered Wall Street bank.

Market breadth was negative. On the New York Stock Exchange, decliners beat advancers by more than 2 to 1 as 924 million shares changed hands. On the Nasdaq, losers topped winners 9 to 5 on volume of 1.62 billion shares.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 4.64 percent from 4.67 percent late Monday. Bond prices and yields move in opposite directions.

COMEX gold prices moved slightly lower after hitting a 28-year high, as prices fell 20 cents to $762 an ounce.