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Dow Sheds Over 1% Amid Recovery Fears

Published: Wednesday, 28 Oct 2009 | 4:46 PM ET

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By: Cindy Perman
CNBC.com Staff Writer

Stocks posted their biggest declines since Oct. 1 on Wednesday as worries about the recovery gripped the market.

The Dow Jones Industrial Average shed 119.48, or 1.2 percent, to close at 9,762.69. The S&P 500 lost 2 percent and Nasdaq dropped 2.7 percent.

The CBOE volatility index, widely considered the best gauge of fear, jumped to just shy of 28. The gauge had been inching toward 20 before the recent selloff.

Major U.S. Indexes

.DJIA

.NCOMP

.SPX

The data today backed up those fears: New-home sales dropped 3.6 percent in September and August's gain was revised lower. Economists had expected sales to rise. That piled on to the bad news for the housing sector after an earlier report showed mortgage applications fall for the third week in a row last week.

And Goldman Sachs slashed its forecast for third-quarter GDP to 2.7 percent from 3 percent. The government's first read on Q3 GDP is due out on Thursday.

Poll: If This Is a Correction, How Far Will Stocks Fall?

Investors shrugged off a report that showed durable-goods orders rose 1 percent in September, though compared to last year fell more than 24 percent.

Financials and materials were among the day's biggest decliners as the dollar strengthened.

Alcoa [AA Loading... () ], Caterpillar [CAT Loading... () ] and Intel [INTC Loading... () ] were the biggest drags on the Dow. Telecoms AT&T [T Loading... () ] and Verizon [VZ Loading... () ] were at the top of the pack.

FOR INVESTORS

Oil fell, settling at $77.46 a barrel, after a report showed crude inventories rose by just 778,000 barrels last week. Economists had expected a 1.7 million build. Gold dropped nearly $5, settling at $1,029.90 a troy ounce.

The Treasury's five-year auction today was met with decent demand but it wasn't as strong as the other auctions this week. Tomorrow is the seven-year auction.

Investors also shrugged off some earnings beats: ConocoPhillips [AIG Loading... () ] reported a sharp drop in earnings and revenue from a year earlier but still beat expectations.

Visa [AIG Loading... () ] beat on both earnings and revenue with its results after the bell Tuesday, and raised its dividend.

The tech-heavy Nasdaq was the hardest hit of the three indexes, down 2.7 percent, as investors have begun to unwind some of their recovery trades in tech and consumer discretionary. Those sectors were among the hardest hit in yesterday's session.

Intel [INTC Loading... () ] lost 3.6 percent, Apple [AAPL Loading... () ] dropped 2.5 percent and Microsoft [MSFT Loading... () ] shed 2 percent.

Verizon [VZ Loading... () ] and Motorola [MOT Loading... () ] advanced as the pair debuted their new phone that uses Google's [GOOG Loading... () ] Droid software. The phone goes on sale Nov. 6, priced at about $200 after rebate.

Garmin [GRMN Loading... () ] fell a whopping 16 percent as the Google phone also includes a free app for GPS navigation, Gizmodo reports.

The Nasdaq is now lower for October, though the Dow and S&P 500 are still higher for the month.

Winterizing Your Portfolio - A CNBC Special Report

A tale of two IPOs today: Vitamin Shoppe shares [VSI Loading... () ] soared 6 percent after the vitamin chain's IPO priced above expectations. It's the first retailer to go public in two years. But Addus Homecare [ADUS Loading... () ] fell more than 15 percent in its debut on the Nasdaq after pricing below expectations.

Apollo Group [APOL Loading... () ] dragged on the Nasdaq, tumbling 18 percent, as federal regulators opened a probe into the educational group's accounting and at least three brokerages downgraded the stock.