Stocks fall as investors find no hint of rate cut

NEW YORK -- Stocks finished sharply lower Wednesday as a jittery Wall Street sold off on a report showing a large drop in pending home sales and read anecdotal data from the Federal Reserve's regional banks as offering little more assurance that an interest rate cut is likely. The Dow Jones industrial average dropped more than 140 points.

Bond prices soared as investors again sought the safety of government debt, sending yields to multi-month lows.

The National Association of Realtors said Wednesday pending sales of existing homes fell in July to the lowest level in nearly six years.

The Fed's Beige Book, which describes economic conditions in regions around the country, reported Wednesday that while upheaval in the financial markets has made the housing slump worse, the overall economy hasn't been widely harmed.

Both Wall Street and Main Street have anxiously awaited the Fed's survey for clues about what the central bank will do regarding interest rates on Sept. 18, its next regularly scheduled meeting.

The Fed said most banks reported the recent developments in financial markets had led to more restrictive lending standards for people wanting home mortgages. That "was having a noticeable effect on housing activity," the Fed said.

The report said retail sales generally were positive, but several Fed regions described automobile and furniture sales as slow. Similarly, manufacturing expanded across most regions, although there were reports of "softening demand for building materials and autos."

On the jobs front, the Fed said nearly every district reported at least modest increases in employment. The lone exception was the Chicago region, which characterized employment conditions as mixed.

With regard to inflation, outside a burst of higher food costs, most districts reported little change in overall price pressures. A subdued inflation climate would give the Fed more leeway to cut rates if it needs to.