Signs of a weaker housing market and a gloomier outlook on the economy gave investors more reasons to dump stocks.
Major market indexes fell by the largest amount in about a month Wednesday after the Commerce Department said new home sales dropped for the first time in five months. Sales slid 3.6 percent in September to 402,000. Analysts had expected an increase.
The Dow Jones industrial average lost 119 points, or 1.2 percent, in its third straight triple-digit drop.
The Nasdaq composite index fell 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 in a tough economy and so they suffered some of the biggest losses.
The retreat came as Goldman Sachs Group Inc. reduced 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 as did shares of companies whose business is expected to fare better in a slump. Stocks of consumer staples companies like Procter & Gamble Co., which makes Tide detergent and Gillette razors, edged higher.
Energy, financial and retail stocks posted some of the biggest losses.
Analysts said the market’s slide in the past week isn’t surprising given the size of the advance in the past eight months and 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.
Wednesday’s drop was the biggest for stocks since Oct. 1, when traders grappled with worries about jobs and manufacturing.
The Dow fell 119.48, or 1.2 percent, to 9,762.69. The index is down in five of the past seven days. Broader indexes fell for a fourth straight day, the longest streak of losses in about a month.
The Standard & Poor’s 500 index slid 20.78, or 2 percent, to 1,042.63. The Nasdaq dropped 56.48, or 2.7 percent, to 2,059.61.
The Russell 2000 index fell 20.63, or 3.5 percent, to 566.36.
At the New York Stock Exchange 2,777 stocks fell, while 322 rose. Consolidated volume came to 6.7 billion shares compared with 5.4 billion Tuesday.
Overseas markets also tumbled.
Bill Schultz, chief investment officer at McQueen, Ball & Associates in Bethlehem, Pa., said investors are looking at the latest data and worrying that the market has risen too much in anticipation of a recovery. The S&P 500 index is up 54.1 percent from a 12-year low in March, though it is down 5 percent since the start of last week, when it finished at its highest level in more than a year.
The biggest slide since the market began rebounding eight months ago was a 7 percent slide from mid-June to mid-July.
"You’re starting to see some trepidation about how we move forward," Schultz said. He said the market is likely to stall without improvements in how much revenue companies bring in and better readings on unemployment.
With about half the companies in the S&P 500 index having reported third-quarter results, revenue is down 7.5 percent, according Thomson Reuters. The unemployment rate stands at 9.8 percent and is expected to top 10 percent.
A strengthening dollar has weighed on commodities prices. That has hurt stocks. The ICE Futures US dollar index rose for a fifth straight day Wednesday, its longest advance since the start of July.
Bond prices rose as investors sought safety. That sent yields lower. The yield on the benchmark 10-year Treasury note fell to 3.42 percent from 3.45 percent late Tuesday.
Crude oil fell $2.09 to settle at $77.46 per barrel on the New York Mercantile Exchange. Gold fell.
The drop in oil weighed on shares of energy companies. Oilfield services company Schlumberger Ltd. fell $2.66, or 4.1 percent, to $62.27.
Financial stocks fell after GMAC Financial Services brought reminders of troubles still hitting many lenders. The former financing arm of General Motors Co. is in talks with the Treasury Department for a third bailout. The company has been among the financial firms hardest hit by rising loan defaults and troubled credit markets. The government holds a 35 percent stake in GMAC after giving it $12.5 billion in bailout money.
Home builders fell after the sales data. Hovnanian Enterprises Inc. slid 41 cents, or 9.5 percent, to $3.89. Toll Brothers Inc. fell 99 cents, or 5.5 percent, to $16.95.
The drop in new home sales follows a report from the National Association of Realtors last week that sales of existing home posted the biggest increase in 26 years in September. Some buyers were trying to get ahead of a tax credit set to expire.
Britain’s FTSE 100 fell 2.3 percent, Germany’s DAX index fell 2.5 percent, and France’s CAC-40 slid 2.1 percent. Japan’s Nikkei stock average fell 1.4 percent.
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