The bleak reports underscored the self-reinforcing cycle hampering the economy: As home prices sink, foreclosures rise, banks feel pressure to shy away from lending and employers cut jobs.
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. According to preliminary calculations, the Dow fell 283.10, or 2.43 percent, to 11,349.28. It was the biggest decline for the Dow since June 26.
The Labor Department said the number of newly laid-off people filing for unemployment benefits rose to 406,000 last week, a jump of a seasonally adjusted 34,000. The last time jobless claims were higher was after the Gulf Coast hurricanes in 2005.
The housing news wasn't any better: As sales of previously owned homes fell in June and a glut of unsold and foreclosed homes on the market, the value of Americans' biggest asset continued to sag.
The median price for a home sold in June was $215,100, a drop of more than 6 percent from a year earlier and the fifth-largest year-to-year price drop on record, the National Association of Realtors said. Sales of previously owned homes fell 2.6 percent, to an annualized rate of 4.86 million.
With companies laying off workers and new jobs increasingly hard to find, the ranks of new homebuyers could shrivel further, spelling even more trouble ahead for the housing market and the economy. Consumer spending, the very lifeblood of the economy, is further in jeopardy.
''If you don't have a job or are concerned about keeping your job, you are not going to rush out to buy anything - let alone a home,'' said Richard Yamarone, economist at Argus Research.
On Wall Street, investors also absorbed a mix of earnings reports from names like Ford Motor Co., which reported a big loss, and Dow Chemical Co., which said higher costs for raw materials sent earnings down sharply. But drug makers Bristol-Myers Squibb Co. and Eli Lilly & Co. both reported higher earnings as the weak dollar boosted foreign sales, and Amazon.com Inc. turned in a solid report that beat expectations.
The pullback erased the nearly 170 points added in the two previous sessions. Last week, the Dow gained nearly 400 points. While some declines after the latest rally wouldn't have come as a surprise, the drop Thursday revealed fresh unease about the economy.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 29.65, or 2.31 percent, to 1,252.54. A jump in Amazon.com Inc. shares helped contain some of the decline in the technology-heavy Nasdaq composite index, which fell 45.77, or 1.97 percent, to 2,280.11.
Another report Thursday showed the number of vacant houses hit an all-time high in the second quarter as the U.S. real estate recession pushed homeowners into foreclosure.
A total of 18.6 million U.S. homes stood empty, more than at any time in history, as lenders seized a record number of properties. The figure was 6.9 percent higher than a year earlier, the U.S. Census Bureau said Thursday.
The collapse of the mortgage market caused by a surge in loan defaults last year has prompted more than $467 billion in credit losses and asset write-downs at the world's biggest financial firms. This week U.S. lawmakers reached agreement on a modified version of a plan by Treasury Secretary Henry Paulson to inject capital into Fannie Mae and Freddie Mac, the federally chartered mortgage buyers who own or guarantee almost half of the outstanding $12 trillion of the nation's mortgage debt.
''Every foreclosure creates an instant vacancy, and it tends to stay that way for some period of time as banks try to figure out what to do with these properties,'' Brian Bethune, chief U.S. financial economist at Global Insight Inc., in Lexington, Mass.
The vacancy rate, the share of U.S. homes for sale, was 2.8 percent, down from an all-time high of 2.9 percent in the first quarter, the Census Bureau said.
