* Home sales data dulls rescue plan optimism
* Price of oil rises $1.52
* Dow down 1.3 pct. S&P 500 down 1.3 pct, Nasdaq down 0.95
pct
(Updates to afternoon, changes byline)
By Kristina Cooke
NEW YORK, July 24 (Reuters) - U.S. stocks fell on Thursday
as a rise in oil's price and a report showing a drop in sales
of existing U.S. homes to a 10-year low renewed worries about
the economy and profit growth.
Financial companies, which have been incurring huge losses
from the housing slump, slid after the house sales data from
the National Association of Realtors.
Shares of mortgage finance companies Fannie Mae <FNM.N> and
Freddie Mac <FRE.N> fell more than 13 percent, just a day after
the House approved a housing rescue package that would include
a U.S. government lifeline for the two companies. S&P financial
stocks <.GSPF> fell more than 4.2 percent.
The rise in oil also helped reverse the market's two day
bounce, as did a record quarterly loss at Ford Motor Co <F.N>
and a profit miss at Dow Chemical <DOW.N> the largest U.S.
chemical maker.
"As much as their having bills passed and as much as the
government provides a backstop, Fannie and Freddie are probably
in need of a capital infusion and that fear is not going away.
The housing data provided a catalyst today," said Steve
Goldman, market strategist at Weeden & Co based in Greenwich,
Connecticut.
The Dow Jones industrial average <> fell 161.05 points,
or 1.38 percent, to 11,471.33. The Standard & Poor's 500 Index
<.SPX> was down 15.79 points, or 1.23 percent, at 1,266.40. The
Nasdaq Composite Index <> was down 21.02 points, or 0.90
percent, at 2,304.86.
Adding to the negative tone were brokerage downgrades on
three Dow components: Boeing Co <BA.N> shares fell more than 6
percent; McDonald's Corp <MCD.N> fell more than 1 percent and
AT&T <T.N>, slid 3 percent.
Ford shares fell 11.9 percent to $5.31 on the New York
Stock Exchange after the automaker posted a wider-than-expected
loss on declining sales of pickup trucks and sport utility
vehicles (SUVs) in North America. []
Shares of U.S. aircraft company and defense contractor
Boeing fell 6.5 percent to $62.39, while the stock of AT&T, the
largest U.S. telecommunications company, dropped 3.8 percent to
$31.80.
Citigroup and Sanford Bernstein cut their price targets on
Boeing, while Cowen & Co slashed its rating on the stock.
JPMorgan cut AT&T to "neutral" from "overweight."
McDonald's stock dropped 1.3 percent to $58.90. Deutsche
Bank downgraded McDonald's stock, according to
theflyonthewall.com, a financial Web site. On Wednesday,
McDonald's reported quarterly profit that beat Wall Street's
expectations, but its stock declined after executives said it
faced higher costs for beef and chicken.
Dow Chemical said its profit missed Wall Street's
expectations as it grappled with higher energy prices. Its
stock fell 0.7 percent to $34 on the New York Stock Exchange.
U.S. oil futures rose $1.60 to $126.07 a barrel after a
drop of more than 5 percent over the previous two sessions.
On the Nasdaq, Apple Inc <AAPL.O>, the maker of the iPod
and iPhone, led declines, falling 3.2 percent to $160.93.
Among financials, Citigroup <C.N> shed 7 percent to $19.60
and Goldman Sachs Group <GS.N> fell 2 percent to $183.11.
Shares of Fannie Mae and Freddie Mac sank. Fannie Mae's
stock was down 15.3 percent at $12.70. Freddie Mac's stock was
down 13 percent at $9.41.
Bill Gross, chief investment officer of PIMCO, said the
U.S. housing market faces $1 trillion in losses. The manager of
the world's biggest bond fund said in his investment letter the
best way to help the ailing U.S. housing market recover will be
to cut the cost of mortgages via the U.S. housing bill and
rescue package for mortgage finance companies.
The housing bill must still be passed by the U.S. Senate
before it goes to President George W. Bush, who has pledged to
sign the bill after abandoning an earlier threat to veto it.
Jim Awad, chairman of W.P. Stewart & Co. Ltd. in New York
said the rescue package "is a splint on a broken arm, but it
still will take time for the arm to heal."
Home builder Ryland Group's <RYL.N> shares fell 22 percent
to $20.69 after reporting a wider-than-expected loss late on
Wednesday. The Dow Jones home construction index <.DJUSHB> fell
10.5 percent.
Another report on Thursday showed a larger-than-expected
rise in the number of Americans filing for jobless benefits in
the latest week, adding to concerns about a slowing labor
market.
(Additional reporting by Steven C Johnson; Editing by Kenneth
Barry)
