(Agencies)
Updated: 2008-03-25 23:52

NEW YORK -- Stocks fell on Tuesday on data showing yet more weakness in the feeble housing market, while a plunge in consumer confidence renewed recession fears.

Traders work on the floor of the New York Stock Exchange March 25, 2008. US stocks fell on Tuesday on data showing yet more weakness in the feeble housing market, while a plunge in consumer confidence renewed recession fears. [Agencies]

The Office of Federal Housing Enterprise Oversight and the Standard & Poor's/Case-Shiller home price index both reported further drops in US home prices, while US consumer confidence took an unexpectedly sharp hit in March, dropping to a five-year low, a Conference Board report showed.

"What you're getting is the reality check of the rally we had since the Bear Stearns deal was announced," said Jim Awad, Chairman OF W.P. Stewart & Co Ltd in New York.

"Up until today the market has had an admirable capability to go up in the face of bad news. Today is the first day it is not holding."

The Dow Jones industrial average (.DJI) slipped 61.79 points, or 0.49 percent, to 12,486.85. The Standard & Poor's 500 Index (.SPX) fell 3.86 points, or 0.29 percent, to 1,346.02. The Nasdaq Composite Index (.IXIC) shed 3.09 points, or 0.13 percent, to 2,323.66.

An earnings downgrade of Merrill Lynch (MER.N) and a rating cut on Bank of America (BAC.N) over exposure to the bursting housing bubble further dampened sentiment in the recently buoyant financial sector.

Shares of Freddie Mac (FRE.N) fell 4.6 percent to $29.20 after the No. 2 US home funding company said delinquencies on its single-family home financing business rose to their highest since 1997.

The Dow Jones home builders index (.DJUSHB) fell 1.64 percent.

On Monday, US stocks capped their biggest two-session advance in nearly four months on hopes that financial shares had reached a bottom following a buyout of beleaguered investment bank Bear Stearns (BSC.N), but investors pulled back amid fresh worries about the economy's health.

The S&P's index of financial stocks (.GSPF) fell 1.3 percent, weighed by the possibility of further mortgage-related write-downs at some the largest US banks.

Bank of America, the biggest laggard in the S&P, fell 3.7 percent to $40.88, while shares of Merrill Lynch declined about 3 percent to $46.94. Shares of JPMorgan Chase (JPM.N) fell about 2 percent to $45.59.

All three indexes had risen briefly earlier, helped by a raised 2008 forecast from Monsanto Co (MON.N) and a brokerage upgrade of Yahoo Inc (YHOO.O).

Monsanto's shares climbed about 8.6 percent to $113.26, while Yahoo rose 2.47 percent to $28.20.