Stocks declined as the market got a triple whammy: Oil resumed its ascent, major earnings reports sparked a fresh wave of concern about corporate profits and home sales hit a 10-year low.
Oil rose more than $1 a barrel, settling at $125.49 a barrel.
Today's uptick in oil prices was disappointing as crude's slide had cheered up the market that perhaps the long energy, short financials trade was unwinding.
Downgrades on three Dow components didn't help: Boeing , McDonald's and AT&T all dragged on the blue-chip index.
Citigroup and Sanford Bernstein cut their price targets on Boeing, while Cowen & Co slashed its rating on the stock. JPMorgan cut AT&T to "neutral" from "overweight." Deutsche Bank downgraded McDonald's stock a "hold" from a "buy." McDonald's surpassed forecasts but warned that it faces higher costs for beef and chicken.
On the home front, existing-home sales fell 2.6 percent to a 4.86 million annual rate in June, the National Association of Realtors reported; the decline was more than twice what economists had expected and the annual rate was the lowest in 10 years.
Fannie Mae and Freddie Mac opened higher but then fell sharply as enthusiasm for the House approving the rescue plan faded, giving way to concern that it's not enough to stem the housing woes.
"Here's what it does: It postpones or even prevents a 'run on the banks,'" Hugh Johnson, chief investment officer of Johnson Illington Advisors, said of the bailout plan. But, "it's clear to me that Fannie Mae and Freddie Mac's problems are not behind them, but ahead of them. They're still going to be faced with significant challenges to their earnings as a result of defaults and foreclosures."
The spectre of rising foreclosures prompted San Diego City Attorney Michael Aguirre to file a lawsuit against Bank of America to force the bank to make a "foreclosure sanctuary."
In other economic news,jobless claims increased by 34,000 to 406,000 last week.
"There had been, until today, some good numbers -- leading indicators to the economy -- which have been upbeat," Johnson said, citing the recent improvement in jobless claims, building permits and the yield curve. "That's darn good news -- until today," he said.
"I'm encouraged by the recent performance of the market. But, do we have the ALL CLEAR sign to move from defense to offense? No. Clearly we don't. The jobless claims numbers tell you exactly that," Johnson said. "For now, it's going to be one step forward, one step back in the market."
Financials snapped their winning streak and were some of the day's worst performers. The S&P financial index fell 5.7 percent.
Washington Mutual tumbled 20 percent as its reassurance a few days ago that it has "sufficient capital" gave way to concerns about the poor visibility on its mortgage portfolio.
There were a slew of earnings reports today and the big story was that consumer-discretionary companies took it on the chin.
Ford Motor reportedalarger-than-expected loss of $8.7 billion.Analysts had expected dismal results from Ford as it grapples with high gasoline prices and competitive pressures but the overall loss and North American sales came in even worse than expected.
Among other consumer-discretionary companies: Homebuilder and mortgage-finance company Ryland Group posted a large loss, Mexican-restaurant chain Chipotle missed its earnings target and Starwood Hotels lowered its outlook.
Sallie Mae shares fell after the student-loan company slashed its 2008 profit forecast as the company faces high borrowing costs which have cut into its margins.
3M, which makes everything from Scotch tape to optical films for liquid-crystal displays, managed to beat forecasts and backed its full-year outlook, but that was because it got a boost from demand in emerging markets.
Eli Lilly reported its earnings rose on higher sales of its prescription drugs and sharply lower taxes, but the drug maker cut its 2008 forecast.
Dow Chemical missed the earnings mark set by analysts as the company's price increases weren't enough to offset the rise in energy and raw-material costs.
After the bell Wednesday, Amazon.com reassured investors by beating Wall Street targetsbut the sale of one-off assets could have skewed the numbers.
Earlier this week, AT&T met earnings expectations, helped by an increase in wireless subscribers, and Yahoo reported its earnings fell but said its 2008 outlook remains intact.