Stocks fell Tuesday as a flare-up of tensions between North and South Korea combined with downbeat news on the economy gave investors plenty of reasons to sell ahead of the Thanksgiving holiday. The dollar and gold rose as investors sought safe places to park money.
North Korea and South Korea exchanged artillery fire, killing at least two South Korean marines. That came as investors were already concerned that a bailout of Ireland might not be enough to contain Europe's debt crisis. Borrowing costs for Portugal and Spain rose, leading Spain to trim the size of a debt sale.
In the United States, sales of previously owned houses dipped 2.2 percent in October. Also Federal Reserve officials became more pessimistic and lowered their outlook for economic growth for the next year.
The Dow Jones industrial average fell 142.21 points, or 1.3 percent, to 11,036.37. The Standard & Poor's 500 lost 17.11, or 1.4 percent, to 1,180.73. The Nasdaq composite index fell 37.07, or 1.5 percent, to 2,494.95
The showdown between North and South Korea raises tensions in Asia, but it was seen as less of an immediate danger in the United States. Traders said the showdown was seen by many as an excuse to pare back exposure to risk ahead of the Thanksgiving holiday.
Trading is expected to be light Wednesday as people leave early. Markets will be open for an abbreviated session on Friday.
A widening probe into insider trading was still weighing on financial shares yesterday, a day after FBI agents raided the offices of three hedge funds. JPMorgan Chase & Co. was the worst-performing major bank with a 2.3 percent decline, followed closely by Goldman Sachs Group Inc. with a 2 percent fall.
The Federal Reserve lowered its forecast for growth through next year to only 2.4 percent to 2.5 percent this year. That's down sharply from a previous projection of 3 percent to 3.5 percent. - AP