U.S. stocks fell on Thursday as a surprise drop in August sales of existing homes signaled more weakness in housing and investors worried that authorities might be curbing stimulus efforts too soon.
World central banks said they would scale back infusions of U.S. dollars into their banking systems, fueling unease triggered a day earlier when stocks sold off following the U.S. Federal Reserve's decision to slow purchases of mortgage debt.
That program has been one of the key pillars of the Fed's efforts to support mortgage lending.
The losses put the benchmark S&P 500, which has rallied nearly 60 percent in six months from 12-year lows, on track for its worst two-day decline in three weeks as investors pummeled stocks across the board.
All 10 S&P 500 sectors fell, led by energy, materials, financials and industrials.
The housing number today probably threw some gasoline on the fire, said John Kosar, market technician and president of Asbury Research in Chicago. It's not only that the recovery is fragile, but the other important story is just how far the market has come, so fast. The Fed statement was a little bit sobering.
The Dow Jones industrial average .DJI dropped 50.78 points, or 0.52 percent, to 9,697.77. The Standard & Poor's 500 Index .SPX fell 11.43 points, or 1.08 percent, to 1,049.44. The Nasdaq Composite Index .IXICslid 28.03 points, or 1.32 percent, to 2,103.39.
The National Association of Realtors said sales of existing homes fell 2.7 percent to an annual rate of 5.10 million units, a drop that dented some of the optimism that followed four months of gains in home sales. For details, see [ID:nN24343088]
After the report, the Dow Jones U.S. Home Construction index .DJUSHB fell 3.4 percent. Among shares of major homebuilders D.R. Horton (DHI.N) sank 5.5 percent to $11.77, while Toll Brothers (TOL.N) slide 3 percent to $20.06 and Beazer Homes (BZH.N) lost 5.2 percent to $5.71.
With a market that has had such an explosive recovery from its lows, any kind of news that has people second-guessing the recovery will give people an excuse to sell, said Craig Peckham, equity trading strategist at Jefferies & Co in New York.
Stocks had risen briefly after data showed a fall in the number of workers filing new claims for jobless benefits.
Shares of natural resources companies were weighed down by falling global commodity prices, with U.S. front-month crude CLc1 down 4.5 percent at $65.94 a barrel. Spot gold prices XAU= fell below $1,000 an ounce.
Caterpillar Inc (CAT.N) , which makes bulldozers and excavators, was the top drag on the Dow, falling 3.4 percent to $51.31, while Chevron Corp (CVX.N) shares fell 1.5 percent to $70.32.
The S&P energy index .GSPE was down 1.7 percent, while the S&P materials index .GSPM dropped 2.4 percent.
On Nasdaq, Electronic Arts (ERTS.O) shares fell 3.1 percent to $19.22 after a Microsoft (MSFT.O) executive said the software company had no plans to buy the video game publisher