US stocks: Markets fall on oil, Google and housing

NEW YORK - US stocks declined on Tuesday as a US$2-a-barrel drop in crude oil prices pushed down shares of energy companies and losses in Web search company Google hit the Nasdaq.

A lower sales forecast from luxury home builder Toll Brothers Inc., often seen as a bellwether for the housing sector, gave investors more reason to worry and sell housing stocks.

Oil and gas company shares were the biggest drags on the S&P 500 as US crude dropped to close at just above US$63 amid expectations of ample petroleum inventories. Exxon Mobil Corp. fell 2.3 per cent to US$60.55 and ConocoPhillips dropped 4.2 per cent to US$60.10, both on the New York Stock Exchange.

Google's shares slid 4.5 per cent to US$367.92 on Nasdaq, making it the biggest weight on the index. Driving down the stock was concern that potential deals Google is seeking to install its search software on PCs could drive up the costs of acquiring new customers and pressure margins, analysts said.

"You've had a nearly 20-point drop in Google today, you've got significant pressure on home builders, and that's created overall market concern and a desire to raise cash," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.

The Dow Jones industrial average ended down 48.51 points, or 0.45 per cent, at 10,749.76. The Standard & Poor's 500 Indexwas down 10.24 points, or 0.81 per cent, at 1,254.78. The Nasdaq Composite Index was down 13.84 points, or 0.61 per cent, at 2,244.96.

Toll reduced its forecast for home sales for the second time in three months on Tuesday. Its shares fell 5.5 per cent, or US$1.73, to end at US$29.47 on the NYSE.

The Dow Jones US Home Construction Index, made up of home builders' stocks, fell 3.1 per cent.

A Realtors group said home sales in 2006 will fall as house prices rise at rates far below those of 2005.

Analysts said the deteriorating forecasts may indicate housing, a main driver of the US economy, is slowing faster than previously thought.

Metals prices, including gold, fell in a broad-based sell-off. The Philadelphia Stock Exchange Gold/Silver Index of mining companies' stocks slid 7.1 per cent. Benchmark April delivery gold on the New York Mercantile Exchange's COMEX division dropped US$19.50 to end at US$554.80 an ounce, after gold's recent rally to a 25-year high.

Shares of aluminum producer Alcoa Inc. fell 3.6 per cent, or US$1.16, to US$30.87 on the NYSE. Alcoa was one of the biggest weights on the Dow average.

"The metals, housing stocks and oils are creating a significant psychological overhang," James said.

The S&P 500 broke through a technical support level of 1,260, adding psychological pressure, he said.

Stocks extended losses in afternoon trading when US Treasury yields rose following weak demand at an auction of US$21 billion in three-year notes.

The auction may have provided an added drag on the market, since the climbing bond yields would translate into "more yield competition for equities," said Todd Clark, director of stock trading at Nollenberger Capital Partners in San Francisco.

US crude for March delivery fell US$2.02 to settle at US$63.09 in New York, on a forecast that Wednesday's data will show higher petrol inventories.

Shares in beleaguered General Motors Corp., the world's largest auto maker, fell 2.3 per cent, or 53 cents, to US$22.81 on the NYSE after GM cut its dividend in half and slashed executive pay as it tries to turn itself around.

- REUTERS