Stocks Slump as Recovery Doubts Grow

Indexes sank Wednesday, with the Nasdaq off 2.7%, as a drop in new home sales sparked concerns about the economy. Thursday's big event: third-quarter GDP

U.S. stocks closed broadly lower Wednesday as lackluster reports on new home sales and durable goods orders raised concerns about the economy and led to profit taking. The Nasdaq composite index was the worst performer among the major market benchmarks, slumping nearly 2.7%.

On Wednesday, the 30-stock Dow Jones industrial average finished lower by 119.48 points, or 1.21%, at 9,762.69. The broad Standard & Poor's 500-stock index was down 20.78 points, or 1.95%, at 1,042.63. The tech-heavy Nasdaq composite index lost 56.48 points, or 2.67%, to 2,059.61.

On the New York Stock Exchange, 25 stocks were lower in price for every four that advanced. Breadth on the Nasdaq was 20-5 negative. The basic materials, financial, and oil & gas sectors were among the biggest losers.

Treasuries were higher after a solid $41 billion 5-year note auction. The dollar index was higher. Gold futures were lower. Oil futures fell after the Energy Dept.'s weekly U.S. inventory report showed crude oil stocks rose 700,000 barrels, gasoline stocks rose 1.7 million barrels, and distillate stocks fell 2.1 million barrels.

European and Asian shares remained on the defensive. Benchmark indexes finished lower by 2.32% in London, 2.14% in Paris, and 2.46% in Frankfurt. Tokyo stocks ended lower by 1.35%, Hong Kong stocks fell by 1.84%, while Shanghai closed higher by 0.33%.

Investors Wednesday were "demonstrating doubt as to whether the market should continue to rally at this point given its seven months of gains," says

S&P MarketScope.

Sentiment was hurt by a report that September new home sales fell unexpectedly by 3.6% to a 402,000 annual rate; figures for August were revised lower. The news sent shares of homebuilders sharply lower Thursday, with the S&P industry index falling 5.53%.

Traders also weighed a report showing that U.S. durable goods orders rebounded 1.0%, in September, in line with market expectations, after plunging a downwardly revised 2.6% the month before.

With so much uncertainty about the pace of recovery, the government's report on advance third-quarter gross domestic product, scheduled for release at 8:30 a.m. ET Thursday, will be carefully scrutinized. A consensus estimate of economists surveyed by Action Economics calls for GDP to have increased 3.1% in the quarter, after a 0.7% decline in the previous quarter. Goldman Sachs attracted some market attention Wednesday by lowering its third-quarter U.S. gross domestic product estimate to 2.7% from 3.0%.

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