Sales Of Exisiting Homes Fall Sharpley In June

Wall Street abruptly ended an earnings-driven rally and closed sharply lower Thursday after a steeper-than-expected decline in existing home sales and worries about the financial sector chilled the market's recent optimism. The major indexes fell about 2 percent, including the Dow Jones industrial average, which lost more than 280 points.

The National Association of Realtors said sales resumed their decline in June after a slight rebound in May. Existing home sales declined by 2.6 percent in June, well beyond the 1 percent drop economists had forecast. Investors punished shares of homebuilders and financial companies Thursday because both sectors have struggled with the declining housing market. Alan Lancz, director at investment research group LanczGlobal, said investors are concluding that while financials had been oversold in recent weeks and were due for a rebound, problems remain with tight credit and souring mortgage debt.

Financial stocks declined again Thursday after rising sharply in the past week from their recent lows. Washington Mutual Inc. fell 62 cents, or 13 percent, to $4.03 after dropping 20 percent Wednesday as concerns persisted about the company's mortgage portfolio. The nation's largest thrift this week posted a $3 billion loss due to increases in its loss reserves to cover souring loans in its mortgage holdings. Other financials lost ground. Citigroup Inc. fell $2.06, or 9.8 percent, to $19.06, while Merrill Lynch & Co. fell $4.77, or 14 percent, to $29.04. Wachovia Corp. declined $1.96, or 11 percent, to $15.69.

Fannie Mae and Freddie Mac fell sharply after rallying earlier in the week on legislation speeding through Congress that would grant the Treasury Department power to extend the government-sponsored mortgage companies an unlimited line of credit and to buy an unspecified amount of their stock, if necessary. The companies together back or own $5 trillion in mortgages—nearly half the nation's total. Fannie Mae fell $2.98, or 20 percent, to $12.02, while Freddie Mac fell $1.99, or 18 percent, to $8.81.