US stocks fell on Tuesday after a weak consumer confidence report fuelled concerns the housing slowdown could spread into the broader economy and hurt profits. Lennar Corp, a major US home builder, scrapped its 2007 outlook as it posted a 73.4 percent slide in quarterly profit a day after government data on new-home sales pointed to further weakness in the housing market.
Shares of bellwether companies, including chemical maker DuPont Co and diversified manufacturers Honeywell International Inc and General Electric Co led the declines, along with shares of home builders and banks.
"People are afraid that the housing market slowdown is going to spill over to the general economy," said Todd Clark, director of stock trading at Nollenberger Capital Partners in San Francisco. "The numbers that came out today suggest that's the case, which obviously would mean more earnings are lighter and stocks wouldn't go higher," he added.
The Dow Jones industrial average dropped 71.78 points, or 0.58 percent, to finish at 12,397.29. The Standard & Poor's 500 Index slid 8.89 points, or 0.62 percent, to end at 1,428.61. The Nasdaq Composite Index lost 18.20 points, or 0.74 percent, to close at 2,437.43. The Conference Board, a private research group, said its index of consumer sentiment declined in March amid rising gasoline prices and turmoil in financial markets.
Shares of Lennar slumped to their lowest level in over six months on Tuesday, but retraced lost ground in early afternoon trading to end off only 0.09 percent, or 4 cents, at $44.50 on the New York Stock Exchange.
Lennar's stock slid as low as $42.64 during the session in volatile trade - its lowest level since September 2006. Meanwhile, the Dow Jones Home Construction index fell 1.46 percent.
Standard & Poor's Equity Research homebuilders industry analyst Tom Smith said in a research note before the close he upgraded his rating on Lennar to "hold" from "sell," citing valuation. The third-largest US home builder said the widening problems in the subprime lending sector have weakened an already anemic market.
Its results came a day after the Commerce Department reported that new home sales fell unexpectedly in February, marking the second straight month in which sales came in lower than even the most bearish forecasts on Wall Street.
In other housing news, a senior US Federal Reserve staff member warned that subprime mortgage market troubles could last as long as two years. Shares of DuPont were the biggest decliner on the Dow, ending down 3.02 percent, or $1.55, at $49.81 on the NYSE. GE shares were also among the Dow and the S&P 500's worst performers, ending off 0.58 percent, or 21 cents, at $35.79, on the NYSE.
Shares of Honeywell dropped 1.29 percent, or 61 cents, at $46.73. Among other home builders on the NYSE, KB Home shares dropped 1.48 percent, or 68 cents, to end at $45.31, while shares of Toll Brothers finished down 1.56 percent, or 45 cents, at $28.40.
Shares of home improvement retailers also fell. Home Depot Inc's stock ended down 1.5 percent, or 57 cents, at $37.34, while Lowe's Cos. shares dropped 1.24 percent, or 40 cents, to $31.74. Among banks, shares of Citigroup Inc fell 0.93 percent, or 48 cents, to close at $51.06 on the NYSE.
Prices of existing US single-family houses extended their slide in most regions in January, according to the Standard & Poor's/Case-Shiller Home Price Index of 10 metropolitan areas. Among gainers, shares of AT&T Inc jumped 0.33 percent, or 13 cents, to $39.44 on the NYSE after the company said its Cingular Wireless unit had received about 1 million inquiries about Apple Inc's hotly anticipated iPhone.