Stocks sold off sharply on Thursday and the Dow and S&P 500 fell 2.3%, as disappointing news from the housing industry stirred up concerns about credit markets and the U.S. economy.
"Nobody knows whose credit is worth what," said Art Cashin, director of floor operations at UBS.
New home sales fell by 6.6% in June, far worse than the 1.6% decline analysts were expecting, according to a survey conducted by CNBC and Dow Jones.
Results from Beazer Homes didn't help sentiment. The company, which is facing a deteriorating U.S. housing market and federal investigations into lending practices, posted a quarterly loss of $3.20 a share. That was significantly worse than than Wall Street estimates for a loss of 32 cents a share, according to Thomson Financial.
And homebuilder DR Horton posted a steep loss for its fiscal third quarter, as the company recorded enormous charges to write down the value of unsold inventory and deposits on land. The company posted a loss of $823.8 million, or $2.62 a share, far worse than the loss of 35 cents a share analysts were expecting, according to Thomson Financial.
The Dow was down as much as 449 points, or 3.3%, at its worst during the session, but closed with a 312-point loss. The deep selloff triggered trading curbs on the NYSE prohibiting certain types of computerized index arbitrage trading. Curbs were also in effect in Tuesday's session.
Exxon Mobil fell 4.9% after the oil giant posted a 1% drop in quarterly earnings, below Street estimates.
Apple was a bright spot following stellar results due to strong iPod sales. Apple also said it sold 270,000 of its new iPhones.