Stocks retreat on weaker-than-expected reports

NEW YORK -- Stocks pulled back Wednesday after a drop in February's durable goods orders injected the market with more pessimism about the economy. The Dow Jones industrial average fell more than 100 points.

Considering that the Dow has added more than 425 points in the past three sessions, a pullback does not come as a surprise, particularly after the Commerce Department reported that durable goods orders dropped 1.7 percent. It was the indicator's second straight monthly decline. The market had expected orders to rebound.

Meanwhile, a Commerce Department report showing slumping sales of new homes gave investors another reason to sell off. The 1.8 percent decline for February was a bit better than economists surveyed by Thomson Financial/IFR had anticipated, but it still dragged activity down for the fourth straight month to a 13-year low.

It remains unclear how much Wednesday's economic data -- and reports later this week on jobless claims, gross domestic product and personal spending -- will end up eroding the market's recent rally. The Federal Reserve has lowered interest rates, loosened its lending practices and helped prevent a total collapse of Bear Stearns Cos., but the broader economy continues to struggle.

"I think the market has done a decent job of trying to find a bottom in the last few days, and that's certainly an encouraging sign," said David Joy, chief market strategist at Ameriprise Financial Inc.'s RiverSource Investments. "But I don't think there is by any means a general re-emergence of confidence in this market."

In midafternoon trading, the Dow fell 112.59, or 0.90 percent, to 12,420.01.

Broader stock indicators also retreated. The Standard & Poor's 500 index fell 12.09, or 0.89 percent, to 1,340.90, while the Nasdaq composite index fell 26.33, or 1.12 percent, to 2,314.72.

"Part of the reason we're down is the negative data on the heels of fresh optimism, and a combination of that typically leads to selling," said Todd Salamone, director of trading at Schaeffer's Investment Research. "There is also some window dressing going on with the quarter winding down, and we also have earnings reports coming in just a few weeks."

Bond prices rose as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.49 percent from 3.51 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Oil prices soared after the Energy Department said the nation's inventory of crude oil, gasoline and distillate fuels was lower than expected last week. Light, sweet crude shot up $4.33 to $105.55 a barrel on the New York Mercantile Exchange.

Financial stocks fell after Treasury Secretary Henry Paulson said the government should impose more regulation on the nation's investment banks. In a speech to the U.S. Chamber of Commerce, Paulson said the Bush administration will soon release a plan to promote a smoother functioning of financial markets.

The sector was also one of the biggest drags on the market after Oppenheimer & Co. analyst Meredith Whitney lowered her first-quarter profit forecasts for the nation's top four commercial banks. Citigroup Inc., the nation's largest bank by assets, fell $1.25, or 5.4 percent, to $22.16.

Other banks in the Dow dropped as well. Bank of America Corp. fell $1.22, or 3 percent, to $39.75, while JPMorgan Chase & Co. fell $1.83, or 4 percent, to $44.23.

In a sign of how bank woes are affecting companies outside the financial industry, private equity firms leading a $19.5 billion buyout of Clear Channel Communications Inc. were struggling to reach terms with the banks committed to financing the deal, according to a report by The Wall Street Journal. The report said the plan was close to collapse.

Clear Channel fell $5.46, or nearly 17 percent, to $27.10.

Meanwhile, electronic parts manufacturer Jabil Circuit Inc. posted a fiscal second-quarter loss and warned its third-quarter results will fall short of Wall Street's expectations. The disappointing results caused shares to plunge $1.94, or 17 percent, to $9.44.

The Russell 2000 index of smaller companies fell 5.41, or 0.77 percent, to 699.86.

Declining issues led advancers by 5 to 3 on the New York Stock Exchange, where volume came to 808.6 million.

Overseas, Japan's Nikkei stock average fell 0.30 percent. Britain's FTSE 100 fell 0.50 percent, Germany's DAX index fell 0.54 percent, and France's CAC-40 fell 0.33 percent.