Stocks Erase Most of Early Losses After Huge Gain; IBM Sinks

NEW YORK (AP) -

After an early slide, U.S. stocks clawed back much of the ground they lost and ended slightly lower Wednesday. Banks climbed but retailers, homebuilders and smaller companies fell.

Stocks slumped in morning trading as homebuilders and retailers took sharp losses after the Commerce Department said construction of new homes dropped in September. Technology companies fell as IBM suffered its biggest loss in five and a half years after it reported weak sales. Stocks were coming off their biggest gain in more than six months.

Bond prices fell, sending yields higher, after the Federal Reserve said some of its policymakers argued in their latest meeting that the central bank should raise rates to a level that slows economic growth slightly. After years of record low rates following the financial crisis, the fact that some policymakers are talking about eventually using them to slow the economy is a big change.

The S&P 500 index fell 0.71 points to 2,809.21. The Dow Jones Industrial Average slumped 91.74 points, or 0.4 percent, to 25,706.68. It lost as much as 319 points Wednesday morning before briefly turning higher.

The Nasdaq composite slid 2.79 points to 7,642.70. The Russell 2000 index of smaller-company stocks skidded 7.23 points, or 0.5 percent, to 1,589.60.

Stock trading has been erratic recently. Earlier this month the benchmark S&P 500 index went through a six-day losing streak that included huge drops last Wednesday and Thursday. Then on Friday the S&P 500 jumped 1.4 percent, its biggest rally in three months, fell on Monday, and surged 2.1 percent Tuesday. Trading had been steady from late June to early October.

The Federal Reserve released minutes from its meeting in late September, when it raised interest rates for the third time this year. A few participants believed the Fed’s key interest rate would eventually need to “become modestly restrictive” to make sure inflation doesn’t climb too high. Other officials felt the Fed shouldn’t take that step unless there are signs the economy is overheating and inflation is rising quickly.

Bond prices sank. The yield on the 10-year Treasury note rose to 3.19 percent from 3.15 percent.

U.S. home construction fell 5.3 percent in September, according to the Commerce Department. The pace of homebuilding has slowed of late.

Lennar gave up 2.3 percent to $43.08 and PulteGroup shed 3.4 percent to $22.82. Among retailers, Home Depot fell 4.3 percent to $185.17 while Target lost 1.6 percent to $84.42 and Macy’s dipped 5 percent to $31.84.

IBM sank 7.6 percent to $134.05 after its sales in the third quarter fell short of analysts’ estimates.

The price of U.S. crude oil dropped 3 percent to $69.75 a barrel in New York, its first close below $70 a barrel in a month, after the U.S. government said energy stockpiles jumped last week. Brent crude, the international standard, fell 1.7 percent to $80.05 a barrel in London.

Wholesale gasoline lost 3 percent to $1.92 a gallon and heating oil fell 1.2 percent to $2.31 a gallon. Natural gas jumped 2.5 percent to $3.32 per 1,000 cubic feet.

The dollar rose to 112.49 yen from 112.18 yen. The euro fell to $1.1507 from $1.1578.

Gold slipped 0.3 percent to $1,227.40 an ounce. Silver lost 0.3 percent to $14.66 an ounce. Copper fell 0.1 percent to $2.78 a pound.

Germany’s DAX and the French CAC 40 both fell 0.5 percent. In Britain, the FTSE slipped 0.1 percent.