Signs of a weaker housing market and a gloomier outlook on the economy gave investors more reasons to dump stocks Wednesday.
NEW YORK (AP) — Signs of a weaker housing market and a gloomier outlook on the economy gave investors more reasons to dump stocks.
Major market indexes fell Wednesday after the Commerce Department said new home sales dropped for the first time in five months. Sales dropped 3.6 percent in September to 402,000. Analysts had expected an increase.
The Dow Jones industrial average fell 119 points, or 1.2 percent. The Nasdaq composite index slid 2.7 percent, while the Russell 2000 index of smaller companies tumbled 3.5 percent. Many of the stocks in both indexes are considered more risky and so they suffered some of the biggest losses.
The retreat came as Goldman Sachs Group Inc. added to investors’ unease by reducing its expectation for the nation’s economic output for the July-September period. Goldman Sachs predicts third-quarter gross domestic product rose at an annual rate of 2.7 percent, weaker than its earlier forecast of 3 percent.
The government’s report on third-quarter GDP is due Thursday. Economists are looking for growth at an annual rate of 3.3 percent after a record four straight quarters of contraction.
The day’s slide signaled that investors were reassessing their hopes for a recovery in the economy. Demand for safe-havens like Treasurys rose. Stocks of consumer staples companies like Procter & Gamble Co., which makes Tide detergent and Gillette razors, edged higher.
Analysts said the market’s slide in the past week isn’t surprising given the size of the advance in the last eight months and only mixed economic readings.
“I’m not panicked at the moment,” said Manny Weintraub, president of Integre Advisors in New York. “I don’t think anyone expected a super robust recovery.”
Stocks struggled Tuesday after a disappointing report on consumer confidence stirred worries about the strength of the coming holiday shopping period.
According to preliminary calculations, the Dow fell 119.48, or 1.2 percent, to 9,762.69.
The broader Standard & Poor’s 500 index fell for the fourth straight day, sliding 20.78, or 2 percent, to 1,042.63. The Nasdaq fell 56.48, or 2.7 percent, to 2,059.61.