Stocks Sink Further As Home Sales Fall To Eight-year Low

NEW YORK (MarketWatch) -- U.S. stocks fell Wednesday, with the Dow off nearly 150 points, as investors grappled with Merrill Lynch & Co.'s larger-than-envisioned losses and a sharp drop in existing-home sales, inflaming fears of economic trouble ahead.

Already down, the major stock indexes solidified their losses after the National Association of Realtors reported sales of existing homes and condos fell 8% in September to their lowest level in eight years, with median sales prices down 4.2% in the past year. .

"It's not surprising that sales were weak, what is becoming more of a realization is with such high inventory levels, the highest since 1998, that prices are going down, and lower prices are going to affect everything; that is the next leg," said Peter Boockvar, equity strategist at Miller Tabek.

"There were no favorable aspects to today's report on existing home sales, except perhaps the decline in home prices, which could be spun positively if it is seen as helping to clear excess inventories," wrote Tony Crescenzi, fixed-income strategist at Miller Tabak & Co. LLC.

One economist, Pat McPherron of Moody's Economy.com, said home sellers should "put themselves in the buyer's perspective" and drop prices now. .

After shedding more than 200 points, the Dow Industrials was recently off 144.4 points, or 1.1%, at 13,531.9, with 28 of its 30 components lower, with chip manufacturer Intel Corp. leading the Dow's losses, its stock off 4.5%.

The S&P 500 fell 22.89 points, or 1.5%, to 1,496.70.

The Nasdaq Composite declined 61.05 points, or 2.2%, to 2,738.21.

Volume on the New York Stock Exchange came to 781 million, with declining stocks outpacing those advancing about 5 to 1. On the Nasdaq, nearly 1.6 billion shares exchanged hands, and declining issues topped advancers more than 5 to 1.

Merrill's streak

Losses reported by Merrill along with concerns in the pipeline for Internet retail giant Amazon.com fueled worries about the extent of the damage of the recent credit-related trouble and its impact on the economy.

Merrill's third-quarter losses of $2.24 billion, or $2.82 a share, topped expectations of 45-cent a share losses on revenue of $3.25 billion, with write-downs from bad mortgage loans and related securities well above the firm's own forecast just a few weeks ago.

Merrill's stock was off 6.5%.

"The financials are a mess; it's not a pretty sight, the contraction of credit and the losses that are going to be sustained. It's the realization that this is going to be a multi-quarter process, when we were hoping this would be a [throw in everything but the] kitchen sink" approach, Boockvar said.

Topping most Wall Street estimates, Amazon.com Inc. reported strong quarterly earnings, but the online retailer's shares could be pressured on worries about its expected profit margins for the critical holiday shopping season. .

Dow component Boeing Co. reported a steep hike in third-quarter profits, but trimmed its revenue forecast for next year.

"The market had been heading into this earnings season with the knowledge earnings would be brought down by credit concerns and subprime lending, that it might spread to other areas of the economy," said Robert Pavlik, chief investment officer at Oaktree Asset Management.

Rising markets

On the New York Mercantile Exchange, crude-oil futures for December rallied $1.36 to $86.63. .

Gold futures edged lower Wednesday, as the market looked for direction against a backdrop of mixed trading in the dollar, with gold for December delivery falling 30 cents to $762.80 an ounce on the NYME. .

Treasurys rallied, sending yields lower, after Merrill posted huge write-downs and concerns about the economy were fueled by existing homes sale data, with the 10-year note up 18/32 at 103 9/32, its yield at 4.335%. .

Overseas

Defense firm BAE Sysems and engine maker Rolls-Royce climbed after U.S. competitors posted higher profits, but larger-than-envisioned losses at Merrill Lynch and disappointing data from the U.S. sent the top London index to a lower close. .

Several Asian markets reversed direction to end lower, as financials such as Japan's Mizuho Financial Group and Australia's Macquarie Bank reacted to fresh concerns about the U.S. subprime mortgage market. .

By Kate Gibson