Stocks Take Another Late Slide

For the second straight day, a selloff in the final trading hour sinks the major averages.
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Updated from 4:14 p.m. EST

A late selloff again took U.S. stocks to the downside Thursday, mimicking the action of the day before amid more fears of housing and credit problems.

The

Dow Jones Industrial Average

spent time in both positive and negative territory during the session, but ultimately slid 120.96 points, or 0.91%, to 13,110.05. Twenty-two of the Dow's 30 components finished with losses, led by 4% declines in

AIG

(AIG) - Get Report

and

Citigroup

(C) - Get Report

.

Meanwhile, the

S&P 500

ended down 19.43 points, or 1.32%, at 1451.15. The tech-heavy

Nasdaq Composite

declined 25.81 points, or 0.98%, to 2618.51, pressured by a 6.3% drop in

Research in Motion

(RIMM)

.

The major averages took a turn for the worse late in the afternoon as comments from

Wells Fargo

(WFC) - Get Report

CEO John Stumpf pulled down the financials and the homebuilders. Stumpf said the U.S. housing slump is the worst since the Great Depression and that problems in the sector will persist through 2008. Wells Fargo slumped $1.28, or 3.9%, to end the day at $31.97.

Housing stocks

D.R. Horton

(DHI) - Get Report

,

Lennar

(LEN) - Get Report

,

Pulte Homes

(PHM) - Get Report

,

Centex

(CTX)

and

Standard Pacific

(SPF)

all lost 2.2% or more.

"The market's inability to break through resistance levels continues to show uncertainty and bearish sentiment over the near-term, especially now after the Wells Fargo comment," said Michael Sheldon, chief market strategist Spencer Clarke. "The market remains on the defensive, and the next big test will be to see if the Dow and S&P 500 can hold above the August lows."

Also weighing on buyers were more writedowns, an event that has become an almost daily occurrence. This time,

Barclays

(BCS) - Get Report

said it wrote down the value of its securities by $2.7 billion over the last four months.

On the bright side, the figure was significantly less than the rumors last week that the firm would take a $10 billion-plus hit. Still, Barclays was off 88 cents, or 2%, at $43.

Additionally,

General Electric's

(GE) - Get Report

asset-management arm is offering investors in its $5 billion short-term bond fund the opportunity to redeem their holdings at 96 cents on the dollar because it has taken losses related to asset-backed securities.

Shares of GE shed 70 cents, or 1.8%, to close at $38.31.

The energy sector tumbled as oil prices fell 66 cents to $93.43 a barrel following a bearish weekly inventory report from the Energy Department. The Amex Oil Index was down 2.4%, with the worst performers being

Valero

(VLO) - Get Report

,

Sunoco

(SUN) - Get Report

and

Occidental Petroleum

(OXY) - Get Report

.

Other commodities lost ground, as well. Gold slid $27.40 to $787.30 an ounce, and silver fell 58 cents to $14.48 an ounce. The Philadelphia Gold & Silver Sector Index was one of the biggest losers, falling 4.7%.

Breadth was weak. On the

New York Stock Exchange

3.82 billion shares changed hands, as decliners blew past advancers by nearly a 4-to-1 margin. Volume on the Nasdaq reached 2.27 billion shares, with losers beating winners 3 to 1.

Stocks had traded sideways for most of the session in the wake of mild inflationary economic data. The key report came when the Labor Department said its October consumer price index rose 0.3% on the headline, and the core number, which excludes food and energy, advanced 0.2%. Both figures matched expectations.

The CPI followed by a day the producer price index, which showed a surprisingly tame read on inflation at the wholesale level. Prices rose just 0.1%, and the core PPI was unchanged.

The inflationary data were perhaps scrutinized a bit more than normal in light of

Federal Reserve

Chairman Ben Bernanke's announcement Wednesday that the Federal Open Market Committee will look closer at economic releases. Bernanke said that, while core data remain the focus, the central bank will also examine the overall number more closely.

"We were spot on with estimates on the CPI number, so there aren't many surprises," said Art Hogan, chief market analyst with Jefferies. "After Ben Bernanke came out yesterday and said what he did about looking at headline figures, these numbers become concerning. If we're concerned about inflation in terms of monetary policy, it takes the punchbowl away from the party."

Elsewhere on the economic docket, the Labor Department said initial jobless claims jumped by 30,000 last week to 339,000, well above economists' estimates. The Philadelphia Fed manufacturing index was a bit stronger than expected.

U.S. Treasury bonds rallied. At 4 p.m. EST, the 10-year note was up 25/32 in price, pushing the yield to 4.16%. The 30-year bond was up 1-2/32 in price, yielding 4.54%.

On the corporate news side, a few companies were out with quarterly numbers.

Tyco International

(TYC)

said that fiscal fourth-quarter earnings plummeted 85% from a year ago, due mostly to restructuring costs and a higher tax rate. However, the company beat the Thomson First Call average estimate by 2 cents. Tyco fell $1.14, or 3.6%, to close at $37.88.

J.C. Penney

(JCP) - Get Report

posted in-line third-quarter results, but lowered expectations for the fourth quarter. The department-store giant now anticipates earnings of $1.65 to $1.80 a share for the important holiday period, compared with Wall Street's projections of $1.91 a share for the fourth quarter. Shares were off $2.40, or 5.1%, to $44.33.

Following the previous close, chip-equipment maker

Applied Materials

(AMAT) - Get Report

missed revenue targets for its fiscal fourth-quarter. The company also guided below estimates for the first quarter. Still, Applied Materials finished with a gain of 6 cents, or 0.3%, at $18.87.

Several firms were out with ratings changes on financial firms. Credit Suisse upgraded

Merrill Lynch

(MER)

to outperform from neutral following the appointment of John Thain as CEO. Also, Punk Ziegel upgraded

Lehman Brothers

(LEH)

to market perform from sell.

Merrill was down 68 cents, or 1.2%, to close at $57.30. Lehman Brothers lost $2.48, or 3.8%, to $62.97.

At the same time, Punk cut its stock price target for

Bear Stearns

(BSC)

to $109 a share from $120. Shares shed $3.33, or 3.2%, to $99.94.

Overseas markets were uniformly lower. In Asia, Hong Kong's Hang Seng lost 1.4%, and Japan's Nikkei 225 declined 0.7%. As for European bourses, London's FTSE 100 eased 1.1%, while Germany's Xetra Dax was down 1.5%.