Home sales, drilling dispute depress stocks

NEW YORK - Stocks dropped for a second day Tuesday after home sales fell unexpectedly, and the White House said it would fight a court ruling that lifted its ban on offshore oil drilling.

The Dow Jones industrial average fell 149 points, its biggest drop in about two weeks. Treasury prices climbed after demand for safe investments rose.

The National Association of Realtors reported that sales of existing homes fell 2.2 percent in May. The report surprised analysts who thought sales would get a lift from a homebuyer tax credit.

Horsham homebuilder Toll Brothers Inc. slid 3.2 percent, while Hovnanian Enterprises Inc. fell 3.5 percent.

Oil stocks fell after the administration said it would appeal a judge's decision to overturn a six-month ban on deepwater oil drilling in the Gulf of Mexico. Baker Hughes Inc., a supplier of oil drilling parts and services, fell 4.4 percent, while oil-services company Halliburton Inc. fell 3.9 percent.

Market selling intensified shortly before 2 p.m., when the benchmark Standard & Poor's 500 index fell below 1,100, its average finish of the last 200 days. Many professionals who use technical factors in their buying and selling decisions consider the 200-day moving average, as it's called, to be a predictor of the market's direction. The drop below 1,110 hastened the market's slide because computer programs kicked in and drove more selling.

The slide came as the Federal Reserve held the first part of a two-day meeting. It's expected to keep its benchmark federal funds rate in the current range of zero to 0.25 percent. The Fed is maintaining low rates because high unemployment and weakness in the housing market have held back an economic rebound.

The Dow fell 148.89, or 1.4 percent, to 10,293.52.The index is up 4.9 percent from its 2010 closing low of 9,816 on June 7.

The S&P 500 index fell 17.89, or 1.6 percent, to 1,095.31, while the Nasdaq composite index fell 27.29, or 1.2 percent, to 2,261.80.

The euro resumed its slide against the dollar after rising for most of the past 10 days. The euro fell to $1.2267.

The stronger dollar hurts commodity prices by reducing demand from foreign buyers. Crude oil fell 61 cents to $77.21 per barrel on the New York Mercantile Exchange.