Dow Plummets on Housing Woes, Rising Oil Prices

Stock investors suffered one of the biggest blows of the year Thursday, as a woe-filled housing market and rising oil prices caused the Dow Jones industrial average to plunge.

The Dow tumbled more than 400 points before recovering to close with a loss of 311 points, at 13,473.

The drop is the biggest since the index plummeted 416 points Feb. 27, after a nearly 10-percent decline in Chinese stock markets.

Meanwhile, a barrel of crude oil was up 27 cents at $76.15 on the New York Mercantile Exchange, feeding the market's worries about inflation.

Disappointing home sales figures, released Thursday, increased uneasiness about the mortgage and corporate lending markets.

Investors who had been able to shrug off concerns about problems in subprime mortgage lending and a more difficult environment for corporate borrowing were clearly worried again.

The anxiety rose after the Commerce Department reported Thursday that sales of new homes dropped 6.6 percent last month to a seasonally adjusted annual rate of 834,000 units — more than triple what had been expected and the largest percentage drop since sales fell by 12.7 percent in January.

Disappointing results from homebuilders Pulte Homes Inc. and D.R. Horton Inc. further pressured the market.

Jitters also remain throughout the market that the number of private-equity deals — a main driver of the market's record run — might dry up as firms have difficulties accessing credit.

"Wall Street continues to walk a wall of worry," said Ryan Larson, a senior equity trader at Voyageur Asset Management. "The housing market continues to be a story, and nobody knows when it will rebound. But, the real concerns are about credit and oil pushing higher."

Thursday's trading was the latest in a series of frenetic sessions over the past month, many accompanied by triple-digit swings in the Dow. Investors either sold shares on worries about the subprime fallout or bought on optimism that there wouldn't be any widespread problems caused by mortgage failures.

Many analysts have described the back-and-forth trading as overwrought and based on gut emotion that took the Dow across the 14,000 mark for the first time.

But the release of second-quarter corporate earnings proved sobering.

Not only was the Dow off, but the broader Standard & Poor's 500 index dropped 35.89, or 2.36 percent, to 1,482.20. The Nasdaq composite index, which is laden with tech stocks, tumbled nearly 49 points, to 2,599.

"It has been pretty volatile as of late, but now fears about a credit crunch are spreading more than they have in the past — and that's causing this drop," said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds. "That's hurting the financials, and now energy companies are joining the party because oil is so high. They make up a large part of the S&P 500."

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