Drop in home sales drags down market

Tim Paradis, Associated Press

Friday, January 26, 2007

NEW YORK - Stocks suffered their biggest pullback in two months Thursday with the Dow Jones industrials logging a triple-digit decline as a lackluster home sales report and a disappointing bond auction halted the market's two-day rally.

The market drifted lower for much of the session after the National Association of Realtors said sales of U.S. existing homes fell 0.8 percent in December.

Then, in the afternoon, a less-than-enthusiastic reception for the Treasury's latest sale of five-year notes sent bond prices falling and yields rising sharply, rattling stock investors already worried about higher interest rates.

Stocks fell further while the yield on the 10-year Treasury note rose to highs not seen since the summer.

The Dow fell 119.21, or 0.94 percent, to 12,502.56. The Standard & Poor's 500 index fell 16.23, or 1.13 percent, to 1,423.90, and the Nasdaq index was down 32.04, or 1.30 percent, at 2,434.24.

Movers

+ Lockheed Martin Corp., up 30 cents, to $97.44. The defense contractor's fourth-quarter earnings rose 28 percent amid growth in its military hardware business and other areas. The company raised its full-year profit forecast.

- Peabody Energy Corp., down $1.24, to $39.67. The coal producer's fourth-quarter profit rose 7.9 percent as sales rose, but the company warned first-quarter earnings would come in well below what Wall Street had been expecting.

+ EBay Inc., up $2.45, to $32.45. The online auction house posted a 24 percent increase in profits as sales rose 29 percent. The company also announced a stock buyback plan.

+ Netflix Inc., up 50 cents, to $23.25. The online movie rental service signed 654,000 new subscribers in the fourth quarter, meeting its goal of reaching 6.3 million subscribers.