Stocks fall as home foreclosures rise

NEW YORK (AP) — Investors are looking at the economy more skeptically.

Stocks retreated more than 2 percent Wednesday and bond prices rose after two reports suggested the economy is not bouncing back as quickly as investors hoped.

The Commerce Department said retail sales fell in April for the second-straight month, while RealtyTrac Inc. reported a troubling rise in home foreclosures.

Investors are mindful that the Dow Jones industrial average spiked 31 percent from its early March lows — the biggest jump in such a short span since the 1930s. After Wednesday’s decline the index is still up 26.5 percent from March 9, but investors are now wondering if the market will see a sharper pullback.

Analysts say a drop of 10 percent from the market’s recent peak would hardly be surprising, especially since recent economic readings have failed to beat expectations.

“Overall, it’s just a market that’s due for a pause, due for a pullback, due for consolidation,” said Quincy Krosby, chief investment strategist for The Hartford. “You don’t want markets to skyrocket. The higher you go, the deeper you fall.”

Few analysts, however, expect the stock market to sink lower than it did in March.

“What we’ve done over the past month-and-a-half is remove this idea of Armageddon,” said Charlie Smith, chief investment officer at Fort Pitt Capital.

The Dow fell 184.22, or 2.2 percent, to 8,284.89.

Broader stock indicators sank even more sharply. The Standard & Poor’s 500 index fell 24.43, or 2.7 percent, to 883.92, while the Nasdaq composite index declined 51.73, or 3 percent, to 1,664.19.

During the market’s two-month advance, investors grew accustomed to data indicating that the economy, while not growing, was at least bottoming out. This week, unexpectedly worse data has thrown a wrench into the works.

On Wednesday, economists had expected April retail sales to be flat, but instead they fell, and March’s sales decline was revised to an even larger drop.