NEW YORK (Associated Press) - Stocks skidded lower Thursday after a steeper-than-expected decline in existing home sales wiped away some of the market's optimism about upbeat earnings reports. The major indexes fell more than 1 percent, including the Dow Jones industrial average, which lost more than 250 points.

The National Association of Realtors said sales resumed their decline in June after a slight rebound in May. Existing home sales declined by 2.6 percent in June, well beyond the 1 percent drop economists had forecast.

The sales drop was a reminder that the housing market and the overall economy are still troubled in many areas. And that persuaded many stock investors to cash in some of their gains from a rally that began last week.

Investors were also absorbing a mix of earnings reports from names like Ford Motor Co., which reported a big loss, and Dow Chemical Co., which said higher costs for raw materials sent earnings down sharply. But drug makers Bristol-Myers Squibb Co. and Eli Lilly & Co. both reported higher earnings as the weak dollar boosted foreign sales, and Amazon.com Inc. turned in a solid report that beat expectations.

Analysts have said that so far, second-quarter earnings reports have been better than many investors expected. That had lifted the market's mood in recent sessions.

Alan Lancz, director at investment research group LanczGlobal, said investors are concluding that while financials had been oversold and were due for a rebound, problems remain with tight credit and souring mortgage debt.

"You have the rally and you almost get the hangover now where you say 'You know, we're not out of the woods yet,'" he said.

In late afternoon trading, the Dow fell 252.08, or 2.17 percent, to 11,380.30. The blue chip index rose nearly 170 points the past two days and nearly 400 last week. A pullback as part of the normal ebb and flow of trading wouldn't have come as a surprise investors though the declines Thursday seemed to reveal renewed unease about the economy.

Broader stock indicators also declined Thursday. The Standard & Poor's 500 index fell 23.50, or 1.83 percent, to 1,258.69, and the Nasdaq composite index declined 32.65, or 1.40 percent, to 2,293.23.

Stocks rose sharply the past two sessions as the price of oil continued its decline. The price is now down more than $20 after just weeks ago hitting a record above $147 a barrel. A barrel of light, sweet crude rose $1.05 Thursday to settle at $125.49 on the New York Mercantile Exchange.

Bond prices jumped Thursday after the housing report sent some investors looking for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.02 percent from 4.12 percent from late Wednesday.

The dollar was mixed against other major currencies, while gold prices rose.

Financial stocks declined again Thursday after rising sharply in the past week from their recent lows.

Washington Mutual Inc. fell 88 cents, or 19 percent, to $3.78 as concerns persisted about the company's mortgage portfolio. The nation's largest thrift this week posted a $3 billion loss due to increases in its loss reserves to cover souring loans in its mortgage portfolio. The stock fell 20 percent Wednesday.

Other financials fell. Citigroup Inc. fell $1.64, or 7.8 percent, to $19.48, while Merrill Lynch & Co. fell $4.04, or 12 percent, to $29.77. Wachovia Corp. fell $1.54, or 8.7 percent, to $16.11.

Even Fannie Mae and Freddie Mac fell sharply a day after the House passed legislation that would grant the Treasury Department power to extend the government-sponsored mortgage companies an unlimited line of credit and to buy an unspecified amount of their stock, if necessary. The companies together back or own $5 trillion in mortgages _ nearly half the nation's total.

Fannie Mae fell $2.73, or 18 percent, to $12.27, while Freddie Mac fell $1.65, or 15 percent, to $9.15.

Lancz said the run-up in previous sessions may have led some investors to become too optimistic about the overall market's prospects for a speedy recovery. Stocks are still down nearly 20 percent from the highs seen in October.

"You're going to have these starts and stops but it's going to be a really long-term process," he said.

In corporate news, Ford said it lost $8.67 billion in the second quarter, largely because of a reduction in the value of assets. The company also said it will bring six European small car models to North America by the end of 2012 as it adjusts production because of high gasoline prices. The stock fell 92 cents, or 15 percent, to $5.11.

Dow Chemical fell 48 cents to $33.76 after reporting sharply higher costs for energy and raw materials contributed to a 27 percent decline in profit.

Bristol-Myers beat expectations with an 8 percent rise in quarterly profit, while Eli Lilly reported a 44 percent jump in earnings. Bristol-Myers rose 31 cents to $22.20 and Eli Lilly advanced 55 cents to $48.17.

Amazon.com jumped $10.74, or 15 percent, to $81.27 after reporting late Wednesday that second-quarter earnings more than doubled to easily top analysts' expectations. The Internet retailer also raised its full-year revenue projections.

The Labor Department reported that the number of people filing first-time claims for unemployment benefits bolted past 400,000 last week as companies trimmed their work forces to cope with a slowing economy.

Stephen Goddard, co-portfolio manager of the AFBA 5Star Balanced Fund, said the decline in housing numbers alongside some better-than-expected earnings reports shouldn't be surprising because mixed reports are common during economic downturns.

"All the numbers don't turn at the same time," he said of economic readings. "It's usually one by one by one. You start seeing incremental improvement."

Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume came to 818.8 million shares.

The Russell 2000 index of smaller companies fell 11.62, or 1.62 percent, to 707.51.

Overseas, Japan's Nikkei stock average rose 2.18 percent. Britain's FTSE 100 fell 1.61 percent, Germany's DAX index shed 1.46 percent, and France's CAC-40 fell 1.38 percent.

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