Bulls Head for the Exits

Updated from 4:06 p.m. EDT

Stocks fell sharply Tuesday as investors digested two stronger-than-expected pieces of economic news and remained defensive ahead of this week's Federal Reserve rate meeting.

The Dow Jones Industrial Average dropped 120.54 points, or 1.09%, to 10,924.74, with 26 of its 30 components finishing in negative territory. The S&P 500 lost 11.37 points, or 0.91%, to 1239.19, and the Nasdaq Composite plunged 33.42 points, or 1.57%, to 2100.25, reflecting a 3.8% hammering in the Philadelphia Semiconductor Sector index.

The 10-year Treasury bond was up 7/32 in price to yield 5.21%, and the dollar fell against the yen and euro.

"This market is exhibiting few positive aspects," said Barry Hyman, equity market strategist with EKN Financial. "We can't string more than one strong day together. The bulls have a tough argument, as there's indiscriminate selling going on."

General Motors ( GM) was the main drag on the Dow. Investors shrugged off its announcement Monday that 35,000 hourly workers have agreed to early retirement or contract buyouts. The stock, which is up 46% since the start of the year partially because of optimism about the buyout plan, dropped $1.83, or 6.6%, to close at $25.92.

Dow component DuPont ( DD) fell 2.7% after French telecom company Vivendi ( V) said it has sold a 1.8% stake in the company. DuPont lost $1.13 to $40.91.

The Nasdaq, meanwhile, was pressured by chipmaker Marvell Technology ( MRVL), which tumbled 15.9%. Marvell said it will purchase Intel's ( INTC) communications and application processor arm for $600 million, plus the assumption of liabilities.

About 1.56 billion shares changed hands on the New York Stock Exchange, with decliners outpacing advancers by an 8-to-3 margin. Volume on the Nasdaq was 1.83 billion shares, and losers beat winners 3 to 1.

"We're seeing movements on really light volume," said Paul Nolte, director of investments with Hinsdale Associates. "We're still waiting for the Fed to move before anything. There wasn't much in the economic numbers so far that were market-moving, so we're still biding time."

August crude added 12 cents to close at $71.92 a barrel. Gold was off $3.30, finishing at $584.40 an ounce. Silver fell 5 cents to $10.19 an ounce, and copper eased 14 cents to $3.18 a pound.

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

Trading was restrained by the Fed's pending interest rate decision, due on Thursday. On Tuesday, the National Association of Realtors said existing-home sales fell by 1.2% to an annualized rate of 6.67 million units in May. Economists expected sales to fall to 6.62 million.

The Conference Board said its consumer confidence index unexpectedly rose to 105.7 in June from a revised 104.7 the previous month. The reading was expected to dip to 103.0.

Mergers news continued to flow Tuesday. A group comprising five separate investors has emerged victorious in the auction for Univision ( UVN), agreeing to shell out $13.7 billion, or $36.25 a share, for the Spanish-language broadcaster. Univision added $1.97, or 6.2%, to $34.

Two Michigan-based banks are merging. Citizens Banking ( CBCF) said early Tuesday it will acquire Republic Bancorp ( RBNC) for cash and stock worth $1.05 billion, or $13.86 a share. Citizens Banking was lower by $2.37, or 8.8%, to $24.66. Republic Bancorp's shares soared 17.8%, up $1.88 to $12.45.

Also, Knight-Ridder ( KRI) shareholders approved the company's sale to newspaper publisher McClatchy ( MNI) late Monday. The deal is worth $4.1 billion and will create the second-largest U.S. newspaper publication company. Knight-Ridder shares eased 62 cents, or 1%, to $60. McClatchy was down $1.42, or 3.5%, to finish at $39.03.

Shares of Take-Two Interactive ( TTWO) tanked 15.7% after the company announced it had received a subpoena concerning last year's disclosure that its Grand Theft Auto: San Andreas title could be manipulated to feature an explicit sex scene. The New York district attorney wants information about how much company executives knew about the hidden scene, among other things. Take-Two fell $2.02 to $10.85.

European regulators are reportedly set to fine Microsoft ( MSFT) about $2.5 million a day for failing to fully implement a 2004 antitrust ruling, according to the Financial Times. The ruling compelled the software maker to share information about its Windows operating system with rival companies. Microsoft was higher by 4 cents, or 0.2%, to close at $22.86.

Kerr-McGee ( KMG) faced its second downgrade in as many days. UBS cut the company's rating to neutral from buy, a day after AG Edwards reduced shares to sell from buy. On Friday, Anadarko Petroleum ( APC) acquired the company and Western Gas Resources ( WGR) in a deal worth almost $22 billion. Still, shares rose 4 cents, or 0.1%, to $69.22.

Overseas, stocks were mostly lower, with London's FTSE 100 down 0.5% to 5652 and Germany's Xetra DAX losing 1% to 5458. In Asia, Japan's Nikkei added 0.1% to 15,172, while Hong Kong's Hang Seng fell 0.2% to 15,775.

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