US STOCKS-Wall St falls on home sales, Fed on tap

                                
   * New home sales drop to record low in May
                                
 * Fed expected to repeat "exceptionally low" rate vow
                                
 * Dow off 0.1 pct, S&P off 0.5 pct, Nasdaq off 0.5 pct
                                
 * For up-to-the-minute market news see [STXNEWS/US]
  (Updates to late morning, changes byline)
                                
 By Rodrigo Campos
                                
 NEW YORK, June 23 (Reuters) - U.S. stocks fell on Wednesday
as data showed U.S. new home sales dropped to a record low in
May and investors were cautious before Federal Reserve comments
on the economy.
                                
 Energy shares also dragged on the market, including Chevron
Corp <CVX.N> which declined 1.8 percent, after crude prices
fell.
                                
 The S&P home builders ETF <XHB.P> fell to its lowest in
more than four months after release of the housing data before
reversing the losses. The phase-out of a popular tax credit
contributed to the 32 percent drop in sales. For details see
[ID:nN23209668].
                                
 Although another sign the recovering is slowing, the
Commerce Department data sparked an overreaction by the market,
according to Kim Caughey, senior equity research analyst at
Fort Pitt Capital Group in Pittsburgh.
                                
 "I don't think anybody should be surprised that once you
take away an incentive of $8,000 to buy a home, in a period
where unemployment is above 9 percent, house sales are going to
drop off," she said.
                                
 "We would love to have the story that we're going to have a
V-shaped recovery. I think that's not coming to fruition."
                                
 The Dow Jones industrial average <.DJI> dipped 14.88
points, or 0.14 percent, to 10,278.64. The Standard & Poor's
500 Index <.SPX> fell 5.91 points, or 0.54 percent, to
1,089.40. The Nasdaq Composite Index <.IXIC> dropped 12.05
points, or 0.53 percent, to 2,249.75.
                                
 Volume was light before a statement from the Fed's
rate-setting committee expected about 2:15 p.m. (1815 GMT). The
Fed is likely to keep interest rates exceptionally low for an
extended period and may acknowledge a slight slowdown in the
pace of the U.S. recovery, according to economists.
[ID:nN22150078]
                                
 The S&P 500 has risen 79 percent of the days on which the
Fed committee has issued rate decisions since 2008 for an
average gain of 1.2 percent, according to Birinyi Associates
Inc.
                                
 The S&P homebuilders ETF was last up 0.1 percent at
$15.25.
                                
 Chevron <CVX.N> was among the biggest drags on the Dow,
slipping 1.6 percent to $72.82 as oil futures <CLc1> fell 2.5
percent.
                                
 An oil services stock index <.OSX> dropped 1.5 percent as
the White House pursued its legal battle to keep deep-water
drilling on hold in the Gulf of Mexico following the worst oil
spill in U.S. history after a federal judge overturned an
initial ban on Tuesday. [ID:nN23161792].
                                
 On the Nasdaq, Adobe Systems Inc <ADBE.O> tumbled 5.2
percent to $31.05 after it said revenue surged but profit did
not grow as quickly. [ID:nN22159184]
                                
 The S&P telecoms service sector <.GSPT> rose 0.3 percent as
Credit Suisse raised its rating on U.S. telecoms services to
"market weight" from "underweight," keeping Sprint Nextel
<S.N>, up 1.2 percent at $4.37, as its top pick.
                                
 For a graphic on home sales
                                
 http://link.reuters.com/max63m
                                
 (Editing by Kenneth Barry)