U.S. Stocks Off At The Start; New Home Sales Data Ahead

NEW YORK (MarketWatch) -- U.S. stocks crumpled at Monday's start, extending a slide that has hedge funds and other investors fleeing equities as fears increase that government steps to bolster financial markets will not prevent a worldwide recession.

"Traders will continue trying to nail the bottom," said Alexander Paris, a financial analyst at Barrington Research Associates Inc.

The Dow Jones Industrial Average shed 76.38 points to 8,302.57, with 25 of its 30 components trading lower.

Energy, utilities and health care paced the declines, with financials and materials faring the best among the S&P 500's 10 industry groups.

The S&P 500 fell 11.56 points to 865.21, while the Nasdaq Composite declined 20.42 points to 1,531.61.

"Perhaps so much investment money has been driven to the sidelines already in the extended capitulation selling that traders won't get the typical one-day heavy liquidation bottom they long for. Instead, it may be a drawn-out bottom like the economy and investors should be easing selectively into the market," said Paris.

A report on September new home sales will be released at 10 a.m. Eastern, with the data expected to show another 2% slide after an 11.5% decline in August.

"Unlike existing homes, new home sales are not benefiting as much from stressed foreclosure sales although builders are likely pricing aggressively to reduce inventories," said Paris.

The U.S. dollar surged against the euro and British pound, but lost ground against the Japanese yen. .

Crude-oil futures declined, briefly falling below $62 a barrel, on worries slower economic growth would curb demand for fuel. .

Overseas, stocks in Hong Kong tumbled as investors who bought shares on credit were forced to sell in a falling market. .

European investors followed suit, with more trouble in the financial sector after a German retail banking group reported a quarterly loss. .

On Friday, U.S. stocks closed at five-year lows.

By Kate Gibson