Housing Data Swat Stocks

Updated from 4:07 p.m. EDT

Stocks finished lower Wednesday as a soft report on existing-home sales raised concerns that the economy might be more in danger of being derailed by a slowdown than by inflation.

After opening higher, the Dow Jones Industrial Average retreated and spent most of the day under water, closing with a loss of 41.94 points, or 0.37%, at 11,297.90. The S&P 500 fell 5.83 points, or 0.45%, to 1292.99, and the Nasdaq Composite dropped 15.36 points, or 0.71%, to 2134.66.

The 10-year Treasury was down 2/32 in price and yielding 4.82%, and the dollar weakened against most major currencies.

"This feels like a calm before a storm," said Dave Briggs, head of equity trading with Federated. "The volume has been so light, and we've been only trading sideways. Some traders are anxious for September to come and end the summer doldrums. It feels like we need one more pullback to give people some bargains and get cash in."

Volume was again light, with about 1.21 billion shares changing hands on the New York Stock Exchange and 1.47 billion shares trading on the Nasdaq. Decliners outpaced advancers 2 to 1.

Pulling down the major averages were data from the National Association of Realtors showing that existing homes sold at a 6.33 million annual clip last month, down 4.1% from 6.62 million a month earlier. The much-anticipated report comes during a week that has seen a dearth of economic data.

"It appears that the optimism based on the Fed stopping its cycle has run its course," said Edgar Peters, chief investment officer with Pan Agora. "Now we are faced again with the prospect that a slowing economy is hurting earnings. We haven't seen any conclusive evidence that inflation is subdued."

Following the larger-than-expected decline, KB Home(KBH Quote - Cramer on KBH - Stock Picks) fell 6.2%, Pulte Homes(PHM Quote - Cramer on PHM - Stock Picks) dropped 3.5%, Hovnanian(HOV Quote - Cramer on HOV - Stock Picks) sank 3.1%, and Toll Brothers(TOL Quote - Cramer on TOL - Stock Picks) was off 2.6%.

To view Gregg Greenberg's video take on today's market, click here.

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