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. Sales fell to a seasonally adjusted annual rate of 5.66 million from a revised 5.79 million in April.
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.
It was the second straight day that the market gave up early gains to end lower. The selling intensified shortly before 2 p.m. Eastern time, when the benchmark Standard & Poor's 500 index fell below 1,111, its average finish of the past 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.
"Without much tangible information to sink your teeth into investors are going to rely on technicals and right now the technicals broke down," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "There are a lot of extreme emotions right now and not a lot of information."
The slide came as the Federal Reserve held the first part of a two-day meeting at which 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.
Christian Hviid, chief market strategist at Genworth Financial Asset Management in Encino, Calif., said traders are concerned that the Fed will issue a more pessimistic view of the economy in the statement that accompanies its decision on interest rates Wednesday. He said expectations for the economy in the second half of the year might have been too high given that borrowing is still restricted and that consumer spending is still weak.
"Not all risk is gone," Hviid said.
The Dow fell 148.89, or 1.4 percent, to 10,293.52, its biggest point and percentage loss since June 4. It was up as much as 51 points in morning trading. 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.
Bond prices rose Tuesday as investors opted for the safety of U.S. Treasurys. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.17 percent from 3.25 percent late Monday.
The Dow on Tuesday crossed the unchanged mark 74 times. Peter Tuz, president of Chase Investment Council in Charlottesville, Va., said trading likely will be choppy until July when companies start to report earnings from April-June quarter.
"It's kind of like summer doldrums until earnings season," Tuz said. "Once that begins you start to get clarity."
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 71 cents to $77.90 per barrel on the New York Mercantile Exchange.
Baker Hughes fell $1.94, or 4.4 percent, to $42.15, while Halliburton dropped $1.06, or 3.9 percent, to $25.99.
Toll Brothers fell 57 cents, or 3.2 percent, to $17.06, and Hovnanian fell 14 cents, or 3.5 percent, to $3.90.
Technology shares fell less than the broader market after Apple Inc. said it sold 3 million iPads in the first 80 days the tablet computers were on sale in the U.S. The stock rose $3.68, or 1.4 percent, to $273.85 and helped limit the losses in the tech-heavy Nasdaq.
Four stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume came to 4.6 billion shares, compared with 4.5 billion Monday.
The Russell 2000 index of smaller companies fell 14.12, or 2.1 percent, to 645.91.
Britain's FTSE 100 fell 1 percent, Germany's DAX index dropped 0.4 percent, and France's CAC-40 fell 0.8 percent. Japan's Nikkei stock average fell 1.2 percent.