US Market Update - 3/27/2007

U.S. stocks posted their steepest drop in two weeks after falling home prices and weaker consumer confidence deepened concern the housing crisis will snuff out economic growth.

All 16 homebuilders in Standard & Poor's indexes fell after Lennar Corp. said it will miss its profit goal and a private report showed home prices decreased for the first time in at least six years. Countrywide Financial Corp., the biggest U.S. mortgage lender, declined the most in the S&P 500 on speculation delinquencies among the riskiest borrowers will rise.

Mounting evidence the U.S. real estate market is deteriorating has sent lenders and companies reliant on consumer spending to the worst performance in the S&P 500 this year. The retreat in home prices follows a government report yesterday showing new-home sales slumped to the lowest in almost seven years.

``To the extent that housing prices go down or housing sales slow, that only exacerbates problems in the subprime sector and could ripple through the economy,'' said John Kattar, who oversees $1.8 billion as chief investment officer at Eastern Investment Advisors in Boston. ``Housing is viewed as key by a lot of investors.''

The S&P 500 slipped 8.89, or 0.6 percent, to 1428.61. The Dow Jones Industrial Average decreased 71.78, or 0.6 percent, to 12,397.29, leaving it with a 2007 loss of 0.5 percent. The Nasdaq Composite Index fell 18.20, or 0.7 percent, to 2437.43. All three benchmarks had their steepest drop since March 13.

Home values dropped 0.2 percent in January from a year earlier, according to the S&P/Case-Shiller index, a measure of home prices in 20 U.S. metropolitan areas. The decrease was the first since the group started the index in January 2001.