Stocks Finish Lower

Investors were discouraged by data on new home sales and durable goods orders. Disappointing revenues from Oracle may weigh on the market Thursday

Major U.S. stock indexes finished lower Wednesday as investors booked profits from the recent rally. Investors were disappointed by declines in durable goods orders for March and new home sales for February. A fresh rise in crude-oil prices weighed on sentiment, as did press reports that the $19-billion private equity buyout of Clear Channel Communications (CCU) was near collapse. An influential Wall Street analyst cut her earnings estimates for large U.S. banks, pressuring financial stocks.

Bonds lost ground in a mixed Treasury market. Gold futures were higher as the dollar index sank.

On Wednesday, the Dow Jones industrial average finished lower by 109.74 points, or 0.88%, at 12,422.86. The S&P 500 index declined 11.86 points, or 0.88%, to close at 1,341.13. The tech-heavy Nasdaq composite index shed 16.69 points, or 0.71%, to end the session at 2,324.36.

Activity in the broader market was negative, with 18 stocks declining in price for every 13 that rose on the New York Stock Exchange. The ratio on the Nasdaq was 16-12 negative.

According to Standard & Poor’s MarketScope, some market players were nervous ahead of Thursday’s reports on final fourth-quarter gross domestic product and weekly initial jobless claims, as well as the Treasury Dept.’s Term Securities Lending Facility (TSLF) auction.

A high-profile earnings release after the close of trading Wednesday may spell trouble for the tech sector on Thursday. Software giant Oracle (ORCL) reported a 30% increase in third-quarter profit – in line with analysts' forecasts -- but its sales came in short of expectations. The shares dropped 8% in after-hours trading Wednesday after edging 0.7% lower during the regular session.

In economic news Wednesday, U.S. durable goods orders fell 1.7% in February after falling 4.7% in January. Orders are up 4.3% from a year ago, compared to 3% previously. However, the headline data are weaker than expected, Action Economics says, which "rattled investors hoping for a rebound from the weak data the month prior."

"The data confirm that the economy is still heading downward," said David Wyss of Standard & Poor's.

U.S. new home sales fell 1.8% to a 590,000 annual rate in February, from a revised 601,000 in January (from 588,000). The January pace was the slowest in over a decade, reports Action Economics. Sales were down in the Northeast and Midwest, and higher in the South and West. Homes for sale dipped to 471,000 from 481,000. “[I]t looks like we're working through some inventory” says Action Economics. The median sales price rose to $244,100 from a revised $225,600 (from $216,000 previously), down 2.7% year-over-year (compared to -11.3% in January).

In a speech to the U.S. Chamber of Commerce Wednesday, Treasury Secretary Henry Paulson said the troubles that brought down Bear Stearns underscore the government's need to strengthen and clarify the rules governing an array of financial players from commercial banks to investment houses.

Paulson said the Bush administration will soon release such a blueprint aimed at promoting the smooth functioning of financial markets. He said most of the new ideas circulating on Capitol Hill, which would generally provide taxpayer money to help reduce loan amounts and refinance mortgages at lower rates to keep homeowners from foreclosing, "are not ready for the starting gate."

Paulson said the Bush administration did not want to support any measure that might slow the necessary correction in the housing market. He said homeowners experiencing negative equity do not need "a system-wide" solution. Only people who want to keep their homes but can't afford the monthly payment because of an interest-rate reset and can't refinance because of negative equity need government assistance, and officials at the Housing and Urban Development have been tasked with examining what government programs can be a solution, said Paulson.