Stocks fell on Wednesday as investors found little new in a major speech by President Barack Obama on how he planned to stabilize the economy, while gloomy home sales data weighed on the market.
Long-standing worries about recession and the fate of the banking sector persisted despite Obama's speech to Congress on Tuesday night, sending shares of financial services companies, big manufacturers and energy companies lower.
The market was up 4 percent yesterday and I think that was probably a little excessive given the economic backdrop, said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.
There was a little bit of an overshoot to the upside yesterday and we're just giving some of that back early as President Obama didn't have anything substantive to say last night.
Data pointing to more weakness in the U.S. housing market added to the negative tone.
The pace of sales of existing home fell in January to a 4.49 million-unit annual rate while home prices and inventories dropped, the National Association of Realtors reported.
The Dow Jones industrial average <.DJI> fell 160.89 points, or 2.19 percent, to 7,190.05. The Standard & Poor's 500 Index <.SPX> declined 17.32 points, or 2.24 percent, to 755.82. The Nasdaq Composite Index <.IXIC> shed 28.29 points, or 1.96 percent, to 1,413.54.
The slide in stock prices marked a major setback after Tuesday's attempted rebound from 12-year lows.
Bank of America
Shares of Citigroup
The Dow Jones home construction index <.DJUSHB> fell 4.4 percent as shares of luxury home builder Toll Brothers
On Nasdaq, shares of thin-film solar module maker First Solar
Obama said the United States would emerge stronger from the crisis but investors found little in what he said to help the market sustain its attempted rebound on Tuesday from 1997 lows. [ID:nN24394594].
U.S. regulators are due to begin stress tests on Wednesday to determine how much capital banks need. Even so, investors remain uncertain about how the government would relieve banks of money-losing assets and revive lending.
Federal Reserve Chairman Ben Bernanke is back on Capitol Hill for a second day to testify on the economy, this time to the U.S. House Financial Services Committee.
(Additional reporting by Rodrigo Campos; Editing by James Dalgleish)