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Worrisome Economic Reports Hit Stocks

From Times Staff and Wire Reports

A mixed economic picture sent stocks tumbling Tuesday, with the Dow Jones industrials falling more than 100 points after investors were unnerved by weakness in consumer confidence and home sales.

Wall Street’s slide dragged European markets lower as well in late trading there.

One day after a number of broad U.S. market indexes hit record highs, some investors bailed out amid a weak reading on February consumer confidence and a report showing a decline in sales of previously owned U.S. homes in January.

Those reports overshadowed the government’s revised estimate of fourth-quarter economic growth. Real gross domestic product grew at a 1.6% annualized rate, up from the 1.1% the Commerce Department initially estimated.

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The Dow index fell 104.14 points, or 0.9%, to 10,993.41.

Among broader indexes, the Standard & Poor’s 500 fell 13.46 points, or 1%, to 1,280.66, and the Nasdaq composite lost 25.79 points, or 1.1%, to 2,281.39, hurt by a sharp decline in Google.

The Russell 2,000 index of smaller stocks, which was among the market gauges that hit record highs Monday, dropped 1.4% to 730.64.

Falling stocks outnumbered winners by more than 2 to 1 on the New York Stock Exchange and on Nasdaq as trading volume jumped.

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Investors’ mood about the market has shifted back and forth in recent weeks with economic data.

On Tuesday, “if you were looking for an excuse to sell, you got a few things pushing you towards that,” said Kurt Brunner, a money manager at Swarthmore Group in West Chester, Pa. “I’m a little more cautious, a little more nervous.”

The weak housing and consumer confidence numbers heightened demand for long-term U.S. Treasury bonds, sending their yields lower. The 10-year T-note yield slipped to 4.55% from 4.59% on Monday.

In other trading, crude oil futures rose 41 cents to $61.41 a barrel in New York trading.

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With scant earnings reports and few Federal Reserve speeches, economic data should continue to dominate the week, said Alexander Paris, economist and market analyst for Chicago-based Barrington Research.

One hurdle stock bulls face is “resistance levels.” As the Dow and S&P; 500 have flirted with 4 1/2 -year highs, those highs have become in effect a ceiling for stock prices, with investors selling off their holdings when the indexes neared those highs.

Stocks ended February mixed. The Dow gained 1.2% and the S&P; rose 0.05%, but Nasdaq lost 1.1%.

So far in 2006, the Dow is up 2.6%, the S&P; is up 2.6% and Nasdaq is up 3.5%.

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In other market highlights Tuesday:

* European stocks were broadly lower with Wall Street. The main German market index lost 2%. The French market slid 1.6%.

* Google tumbled $27.76 to $362.62 after Chief Financial Officer George Reyes told investors that growth at the online search leader was slowing. Reyes told investors at a Merrill Lynch conference that the company would have to find ways to boost revenue.

* Online closeout retailer Overstock.com fell 57 cents to $22.50 after it said it would restate previously reported financial results going back to 2002 to correct how it accounted for freight costs. The correction will cut the net loss reported in each affected annual period.

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* A measure of healthcare shares dropped 1.3% for the biggest retreat in the S&P; 500 among 10 industry groups, as King Pharmaceuticals and Hospira declined on disappointing earnings reports. King dropped $3.62, or 18%, to $16.25. Hospira sank $7.34 to $39.70.

Biotech shares also were weak. An index of 20 major biotech issues dropped 2.3%.

* On the plus side, Sherwin-Williams jumped $2.96, or 7%, to $45.55 for the best performance in the S&P; 500. The No. 1 U.S. paint retailer and two other former makers of lead-based paint don’t have to pay punitive damages based on a jury finding their products harmed children, a Rhode Island judge ruled.

* Staples added $1.47 to $24.54 after the office supplies retailer reported quarterly profit that beat expectations. Staples also raised its annual dividend by 32% to 22 cents a share.

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