NEW YORK (AP) -- Wall Street pulled back Wednesday after a drop in February's durable goods orders injected more pessimism about the economy into the stock market. The Dow Jones industrial average fell nearly 110 points.
Investors who have been worried about the financial health of U.S. companies and individuals were disappointed to see a 1.7 percent dip in last month's orders of durable goods, or big-ticket items that range from refrigerators to cars to computers. The Commerce Department's durable goods report is indicative of business spending and consumer demand, so two straight months of declines were worrisome to Wall Street.
Meanwhile, investors found another reason to be cautious after the Commerce Department said sales of new homes slumped in February. The 1.8 percent decline was a bit narrower than economists surveyed by Thomson Financial/IFR had anticipated, but it still dragged down sales for the fourth consecutive month to a 13-year low.
Considering that the Dow has added more than 425 points in the past three sessions, a pullback does not come as a surprise. But the question for Wall Street now is whether economic data later this week on jobless claims, gross domestic product and personal spending will further erode or rekindle the market's recent rally.
"I think the market has done a decent job of trying to find a bottom in the last few days, and that's certainly an encouraging sign," said David Joy, chief market strategist at Ameriprise Financial Inc.'s RiverSource Investments. "But I don't think there is by any means a general re-emergence of confidence in this market."
The Federal Reserve has lowered interest rates, loosened its lending practices and helped prevent a total collapse of Bear Stearns Cos. But the broader economy continues to struggle with tumbling home prices and rising commodity costs; crude oil, for one, surged back above $105 a barrel on Wednesday.
According to preliminary calculations, the Dow fell 109.74, or 0.88 percent, to 12,422.86, after sinking as many as 155 points during trading.
Broader stock indicators also retreated. The Standard & Poor's 500 index fell 11.86, or 0.88 percent, to 1,341.13, while the Nasdaq composite index fell 16.69, or 0.71 percent, to 2,324.36.
Government bond prices rose as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.49 percent from 3.51 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.
Oil prices soared after the Energy Department said the nation's inventory of crude oil, gasoline and distillate fuels was lower than expected last week. Light, sweet crude shot up $4.68 to finish at $105.90 a barrel on the New York Mercantile Exchange, back toward their record of nearly $112 a barrel.
Financial stocks fell after Treasury Secretary Henry Paulson said the government should impose more regulation on the nation's investment banks. In a speech to the U.S. Chamber of Commerce, Paulson said the Bush administration will soon release a plan to promote a smoother functioning of financial markets.
The financial sector also dragged on the market after Oppenheimer & Co. analyst Meredith Whitney lowered her first-quarter profit forecasts for the nation's top four commercial banks. Citigroup Inc., the nation's largest bank by assets, fell $1.37, or 5.9 percent, to $22.05.
Other banks in the Dow dropped as well. Bank of America Corp. fell $1.13, or 2.8 percent, to $39.84, while JPMorgan Chase & Co. fell $1.95, or 4.2 percent, to $44.11.
In a sign of how bank woes are affecting companies outside the financial industry, private equity firms leading a $19.5 billion buyout of Clear Channel Communications Inc. were struggling to reach terms with the banks committed to financing the deal, according to The Wall Street Journal. The report said the deal was close to collapse.
Clear Channel fell $5.70, or nearly 17.5 percent, to $26.86.
Meanwhile, electronic parts manufacturer Jabil Circuit Inc. posted a fiscal second-quarter loss and warned its third-quarter results will fall short of Wall Street's expectations. The disappointing results caused shares to plunge $2.06, or 18.1 percent, to $9.32.
The Russell 2000 index of smaller companies fell 3.16, or 0.45 percent, to 702.11.
Declining issues led advancers by 5 to 3 on the New York Stock Exchange, where volume came to 1.43 billion.
"Part of the reason we're down is the negative data on the heels of fresh optimism, and a combination of that typically leads to selling," said Todd Salamone, director of trading at Schaeffer's Investment Research. "There is also some window dressing going on with the quarter winding down, and we also have earnings reports coming in just a few weeks."
Overseas, Japan's Nikkei stock average fell 0.30 percent. Britain's FTSE 100 fell 0.50 percent, Germany's DAX index fell 0.54 percent, and France's CAC-40 fell 0.33 percent.