NEW YORK ( TheStreet) -- Stocks lost ground Wednesday as morning data failed to mitigate continued concerns about eurozone debt levels sparked after a ratings agency lowered Portugal's sovereign rating and gave the country a negative outlook.

The Dow Jones Industrial Average closed lower for only the second time in the last 12 sessions, down 53 points, or 0.5%, to 10,836. The S&P 500 dropped 6 points, or 0.6%, to 1168, and the Nasdaq went lower by 16 points, or 0.7%, at 2399.

Portugal was the target of eurozone debt fears, as Fitch Ratings lowered its sovereign rating to AA- from AA with a negative outlook.

Overseas, Hong Kong's Hang Seng ended 0.1% higher, and Japan's Nikkei rose 0.4%. The FTSE in London was slipping 0.05%, and the DAX in Frankfurt was up by 0.1%.

The Economy

Sen. Christopher Dodd (D., Conn.), chairman of the Senate Banking Committee, and Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee, reiterated their resolve to end "too big too fail" as they spoke to reporters after meeting with President Obama to discuss financial regulation. Still, financial stocks turned in one of the better sectorwide performances on the day, as the KBW Bank Index improved 0.4%.

Speaking on how financial foundations affect Main Street at a U.S. Chamber of Commerce event in Washington, Kansas City Federal Reserve Bank President Thomas Hoenig said financial industry reforms should include some form of the "Volcker Rule" to help ensure long-term stability. The rule, named after former Fed Chairman Paul Volcker, who is currently chairing Obama's Economic Recovery Advisory Board, seeks to limit large banks' speculative trading activities.

February new-home sales unexpectedly fell 2.2% to a unit annualized rate of 308,000 in February, according to the Census Bureau. Economists had been expecting sales to come in at 315,000, up from 309,000 in January.

"Home sales continued to disappoint in February as bad weather in the Eastern U.S. delayed a rebound from the post-expected-end-of-the-tax-credit slump in sales in December and January," said PNC chief economist Stuart Hoffman, adding that the homebuyers' tax credit has been extended through the end of April. "We expect to see another surge in sales over March and April and another drop-off in sales activity if the homebuyers' tax credit is allowed to expire at the end of April."

Durable goods orders rose 0.5% in February, which was largely in line with economists' expectations for an uptick of 0.6%. Last month's figure compares with a 3.9% surge in January. Excluding transportation, orders rose 0.9%, beating expectations for a 0.6% rise and also surpassing January's decline of 0.6%.

Oil inventories were much higher than expected, with the Energy Information Administration showing an increase of 7.3 million barrels to crude oil supplies. The level was closer to the bearish 7.5 million-barrel build reported by the American Petroleum Institute late Tuesday than it was to analysts' expectations for an additional 1.67 million barrels.

Gasoline and distillates fell more than analysts polled by Platts had anticipated, with gasoline stocks shedding 2.7 million barrels, compared with forecasts for a drawdown of 1.88 million barrels. Distillates stockpiles dropped 2.4 million barrels, compared with the decrease of 1.25 million barrels that analysts had been projecting for the week ended March 19.

Company News

Bank of America ( BAC) was the Dow's best-performing stock after it signaled that it will start forgiving mortgage loan principal of up to 30% for struggling homeowners. The stock traded 44 cents, or 2.6% higher, to $17.57.

Bank of America shares were the second most actively traded after Citigroup ( C) on the New York Stock Exchange. Sprint Nextel ( S) shares also saw heavy volume and traded 2.9% higher after unveiling the first 4G smartphone at the CTIA trade show. Listed volume on the NYSE also stood at 4.7 billion.

General Mills ( GIS) reported a better-than-expected third-quarter profit and hiked its fiscal-year guidance. The stock was off by $1.39, or 1.9%, to $72.18.

Homebuilder Lennar ( LEN) noted signs of stabilization in the housing market as it reported a narrowed first-quarter loss. The stock gained 63 cents, or 3.7%, to $17.69.

KB Home ( KBH) was one of the few major homebuilding stocks to not make gains as Goldman Sachs lowered its estimates for the company, citing higher operating costs.

Separately, UBS analyst David Goldberg forecast a wider 2010 loss of 75 cents a share, from a previous estimate for a loss of 40 cents a share.

"Although sales and profitability should improve this year, we don't believe the levels achieved will be sufficient to justify multiple expansion from today's valuation," Goldberg said. After finishing Tuesday's session at $17.15, the stock shed 42 cents, or 2.5%, to $16.73.

Shares of MF Global ( MF) rose late Tuesday as it announced the appointment of former New Jersey governor and Goldman Sachs alum Jon Corzine as chairman and chief executive officer. The stock soared 10.4% to $8.08.

Shares of Adobe Systems ( ADBE) finished up $1.29, or 3.7%, to $36.51 after the software maker posted better-than-expected first-quarter earnings and pleased Wall Street with a robust second-quarter outlook.

Starbucks ( SBUX) shares lost 12 cents at $25.29, as the coffee company issued its first cash dividend. Starbucks said the quarterly dividend of 10 cents a share will be paid on April 23, to shareholders of record April 7. The company also authorized the repurchase of 15 million shares, which comes on top of the 6.3 million shares still available for repurchase under previous authorizations.

Daimler ( DAI) shares slipped 2.1% to $45.88. Earlier reports said the auto firm would fork over fines worth $185 million related to an alleged bribery scheme involving foreign government administrators.

Shares of MaxLinear ( MXL), First Interstate BancSystem ( FIBK) and Calix Networks ( CALX) had soaring debuts after pricing their initial public offerings.

Red Hat ( rht) shares dipped 1% in extended trading after adding 1.8% during the regular session, despite beating fourth-quarter earnings and sales forecasts after the closing bell.

Commodities and the Dollar

After inventory data from both the API and the EIA painted a bearish demand picture, crude oil for May delivery traded $1.30 lower to settle at $80.61 a barrel.

Elsewhere in commodities markets, the April gold contract shed $14.90 to settle at $1,088.50 an ounce.

The dollar was trading higher against a basket of currencies in part because of the developments in Portugal, with the dollar index up by 1.3%.


In the afternoon, the government auctioned off $42 billion in five-year notes. But in a show of waning demand, the sale brought in a larger-than-expected high yield of 2.605% and a low bid-to-cover ratio of 2.55, according to MarketWatch. Foreign buyers and other indirect bidders scooped up 39.6% of the competitive bids, though that same group had bought up nearly half of recent offerings.

The bond market took a step back in the aftermath, as the benchmark 10-year note weakened 1 7/32, lifting the yield to 3.837%.

The two-year note fell 5/32, raising the yield to 1.095%. The 30-year bond slipped 1 30/32, hiking the yield to 4.728%.

The government's last debt sale of the week will come on Thursday in the form of a $32 billion auction in seven-year notes.

--Written by Melinda Peer and Sung Moss in New York.

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