Stocks tumble after sales of existing homes fall

NEW YORK — Wall Street abruptly ended an earnings-driven rally and closed sharply lower Thursday after a steeper-than-expected decline in existing home sales and worries about the financial sector chilled the market's recent optimism. The major indexes fell about 2 percent, including the Dow Jones industrial average, which lost more than 280 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.

Investors punished shares of homebuilders and financial companies Thursday because both sectors have struggled with the declining housing market.

Alan Lancz, director at investment research group LanczGlobal, said investors are concluding that while financials had been oversold in recent weeks 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.

The Dow fell 283.10, or 2.43 percent, to 11,349.28. It was the biggest decline for the Dow since June 26.

The pullback erased the nearly 170 points added in the two prior sessions. Last week, the Dow gained nearly 400 points. While some declines after the latest rally wouldn't have come as a surprise, the drop Thursday revealed fresh unease about the economy.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 29.65, or 2.31 percent, to 1,252.54. A jump in Amazon.com Inc. shares helped contain some of the decline in the technology-heavy Nasdaq composite index, which fell 45.77, or 1.97 percent, to 2,280.11.

Stocks had risen in the prior two sessions as the price of oil declined. Oil 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 as some investors looked for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.00 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 62 cents, or 13 percent, to $4.03 after dropping 20 percent Wednesday 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 holdings.

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