NEW YORK 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 may not be enough to contain Europes debt crisis. Borrowing costs for Portugal and Spain rose, leading Spain to trim the size of a debt sale.
In the U.S., 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, or 1.3 percent, to 11,036.37.
The Standard & Poors 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 clash between North and South Korea was one of the most dramatic between the two rivals since the end of the Korean war. Fifteen South Korean soldiers and three civilians were injured in the artillery exchanges.
The escalating tensions came shortly after the reclusive North Korean regime claimed to have a new uranium-enrichment facility and six weeks after the countrys leader Kim Jong Il anointed his youngest son as his heir apparent.
The showdown between the two countries raises tensions in Asia, but was seen as less of an immediate danger in the U.S. Traders said the showdown was seen by many as an excuse to pare back exposure to risk ahead of the Thanksgiving holiday Thursday. Trading is expected to be light today as people leave early. Markets will be open for an abbreviated session Friday.
Hewlett-Packard Co. was the only one among the 30 stocks that make up the Dow Jones industrial average to rise. Shares gained 2.2 percent after the technology company beat Wall Streets expectations for revenue and income thanks to strong corporate spending.
Energy shares led the decline as the price of crude oil fell. Chevron Corp. fell 2 percent, while ExxonMobil Corp. lost 1.7 percent.
A widening probe into insider trading was still weighing on financial shares Tuesday, 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.
Treasury prices rose, sending their yields lower. The yield on the 10-year Treasury slipped to 2.79 percent, down from 2.80 percent late Monday. That rate is a widely used benchmark for business and consumer loans including mortgages.
The dollar rose 1.3 percent against an index of six other currencies and the euro fell 1.8 percent against the dollar. Gold rose 1.5 percent to $1,377.60 an ounce.