Updated from 4:04 p.m. EDTStocks fell Monday as continued strong economic news and solid earnings translated into concerns about inflation and the inevitable raising of interest rates. Growing instability in the Middle East also weighed on investors. The Nasdaq led declines, falling 13 points, or 0.63%, to 2036.77; the Dow Jones Industrial Average closed down 28.11 points, or 0.27%, to 10,444.73; and the S&P 500 shed 5.12 points, or 0.45%, to 1135.48. The 10-year Treasury note traded up 4/32 to yield 4.44%, while the dollar was lower against the euro and the yen. Volume was relatively light; the New York Stock Exchange approached 1.3 billion shares, and decliners outnumbered advancers by about 2 to 1. On the Nasdaq, more than 1.7 billion shares changed hands, and decliners outpaced decliners by about 3 to 2. Despite strong fundamentals in the economy, geopolitical worries have coupled with concerns about higher interest rates and a strengthening dollar to create what Peter Cardillo, chief market analyst at S.W. Bach & Co., called a "fear factor." "What we're seeing here is not so much an increase of the fear factor, but a result of the fear factor making itself known in the marketplace," Cardillo said. "The economy is doing well and earnings are great, but reports about the war in Iraq from over the weekend, rising oil prices and other factors seem to have put a cap on the market for the time being." In Iraq, two American soldiers were killed, and five more wounded, in a large explosion while searching a chemicals warehouse in Baghdad. Meanwhile, one soldier was killed, and eight more wounded, as U.S. forces continued to engage in firefights with insurgents in the besieged town of Falluja. On the economic front, the Commerce Department reported that new-home sales shot up to 1.228 million in March, from an upwardly revised 1.163 million in February. Economists were expecting 1.173 million sales. The housing report continues a string of better-than-expected economic data that is adding to speculation that the Federal Reserve will be forced to raise interest rates before the presidential election in November. Barry Ritholtz, chief market strategist at Maxim Group, has been explaining to clients why the strong economic news is not a good reason to get aggressively bullish on stocks. "If you wait for really good news to put your money into the market, you kind of miss the boat," he said. "You have to sometimes hold your nose and buy when you're not comfortable. "The real concern is that housing numbers this strong show that ultra-low interest rates are having a direct impact on the economy, and if we move from ultra-low to just low, what is that going to pull out of the economy?" Ritholtz added. "On the one hand you have fabulous profits, but the profits are caused by a fabulous stimulus, and the fabulous stimulus now looks to be going away." Investors looked for safety in biotech names, as the Amex Biotech Index closed up 2.4%. The Philadelphia Semiconductor Index led the Nasdaq's decline, falling 2.7%.