Drop in home sales, tumbling oil weigh on stocks

NEW YORK (AP) — A surprising decline in home sales and another sharp drop in oil prices are driving investors to sell stocks.

Major stock indicators fell after the National Association of Realtors said existing home sales declined 2.7 percent in August compared with a 7.2 percent rise in July. Economists had been expecting a fifth straight increase.

The report overshadowed news from the Labor Department that the number of newly laid off workers seeking unemployment benefits fell for a third week in a row. Initial claims for unemployment insurance fell by 21,000 last week to 530,000, better than the 550,000 economists had expected.

Meanwhile, commodities prices tumbled, hurting energy and material stocks, as the dollar regained some ground against other currencies.

The decline in stocks came a day after the Federal Reserve's more upbeat assessment of the economy failed to take stocks higher. While investors still believe the economy is healing, concerns remain about how strong the recovery will be. Investors also worry about what will happen once the government scales back its various economic stimulus efforts.

The Fed said on Wednesday it would slow down its purchases of mortgage-backed securities, extending the end of the program into early next year, and a first-time home buyer's credit is set to expire in November.

"The U.S. government can only support the economy for so long," said Michael Devlin, managing director at Source Trading in Stamford, Conn. "It's hard to determine ... how much these subsidy programs are supporting the economy. You only know when you take them away."

In early trading, the Dow Jones industrial average fell 64.84, or 0.7 percent, to 9,683.71. The Standard & Poor's 500 index fell 12.34, or 1.2 percent, to 1,048.53, while the Nasdaq composite index fell 31.99, or 1.5 percent, to 2,099.43.