Stocks drop as home sales fall.

By TIM PARADIS AP Business Writer
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NEW YORK (AP) -- Stocks fell sharply Wednesday as a jittery Wall Street sold off on a report showing a large drop in pending home sales. The Dow Jones industrial average dropped about 160 points.
The National Association of Realtors said pending sales of existing homes fell in July to the lowest level in nearly six years. Though the report did support the argument for an interest rate cut, it also worried investors who are nervous about the housing market growing so weak that it drags the economy into recession.
Investors' concerns about spreading fallout from market turmoil also intensified after the European Central Bank said it would consider steps to curb recent euro money market upheaval. The statement was a sign the ECB might not lift its benchmark interest rate when it meets Thursday; there had been speculation it would raise the rate a quarter percentage point to 4.25 percent.
Later Wednesday, the Federal Reserve releases its Beige Book, which describes economic conditions in regions around the country. Wall Street could be disappointed if the Beige Book's largely anecdotal findings don't help make the case for a rate cut, which markets have been pining for.
The Fed has held rates steady for more than a year in a bid to reduce inflation that remains above its comfort level. The Beige Book could help indicate whether the economy has been slowed by a stumbling housing market, rising mortgage defaults and tightening access to credit. Stock markets have been volatile for more than a month over such concerns.
Investors had been somewhat more optimistic in recent sessions and sought stocks that have been turned into bargains by declines. The Dow Jones industrial average rose in three of the last four sessions, jumping 91 points Tuesday.
In midday trading, the Dow fell 156.97, or 1.17 percent, to 13,291.89.
Broader stock indicators also dropped. The Standard & Poor's 500 index fell 16.94, or 1.14 percent, to 1,472.48, and the Nasdaq composite index fell 18.05, or 0.69 percent, to 2,612.19.
Bond prices soared as investors again sought the safety of government debt. The yield on the 10-year Treasury note, which moves inversely to its price, fell to 4.48 percent from 4.55 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices slipped.
In corporate news, MGIC Investment Corp., a mortgage insurer, and Radian Group Inc., a credit risk manager, said Wednesday they are dropping plans to merge because of troubles in the mortgage industry. MGIC agreed in February to pay about $5 billion in stock for Radian. Neither side will pay a breakup fee.
Radian rose $1.84, or 10.2 percent, to $19.95, after tumbling in early trading. MGIC rose 63 cents, or 2.1 percent, to $30.96.
The deal's collapse could cause more anxiety on Wall Street as investors have been trying to determine whether the housing pullback and credit tightening might not only slow dealmaking but upend transactions already under way.
Mattel Inc. announced a third major recall of Chinese-made toys in little more than a month because of excessive amounts of lead paint. The world's largest toy maker said the move affects about 800,000 toys. Mattel fell 57 cents, or 2.6 percent, to $21.40.
Costco Wholesale Corp., the warehouse retailer, fell $3.16, or 5.1 percent, to $58.45 after reporting its August same-store sales rose a weaker-than-expected 2 percent largely due to strong international sales. Same-store sales, or sales at stores open at least a year, are a widely followed indicator of retail health.
Most major retailers will be reporting their August sales on Thursday.
Apple Inc. rose 34 cents to $144.53 ahead of an announcement Wednesday that analysts expect will include upgrades to its iPod digital media players.
Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 578.5 million shares.
The Russell 2000 index of smaller companies fell 9.16, or 1.14 percent, to 791.53.
Crude futures rose 12 cents to $75.20 per barrel on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average fell 1.60 percent. Britain's FTSE 100 dropped 1.66 percent, Germany's DAX index declined 1.73 percent, and France's CAC-40 tumbled 2.14 percent.
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