11:30AM Market averages dropped further lower, pressured by economic growth concerns. Housing stocks dropped

U.S. stocks extended losses in late morning trading Tuesday, with the three major averages falling over 1%. A broker downgrade of giant investment banks renewed credit worries and concerns about economic growth. As a result, financial stocks wre negatively affected, with the banking and brokerage sectors posting notable losses.

Citigroup (C) dropped 2.5%, Lehman Bros (LEH) fell 4.2% and Bear Stearns (BSC) declined 2% after Merrill Lynch cut its rating on the stocks to neutral from buy, citing the impact of debt market exposure. The broker forecast a sharp decline in earnings for Lehman Bros and Bear Stearns, while Citigroup is expected to see a smaller reduction in earnings owing to its diversified business.

In addition, Standard & Poor's housing index showed that U.S. home prices in Q2 hit a 20-year low, sending housing stocks down. Hovnanian Enterprises (HOV) slipped 3.6%, luxury homebuilder Toll Brothers (TOL) dropped 3%, and D.R. Horton Inc. (DHI) declined 3.6%.

Also in economic news, the Conference Board announced that its Consumer Confidence Index plunged to 105.0 in August from a revised reading of 111.9 in July. Analysts had expected a decline to 104.5. The FOMC is due to release the minutes of its Aug. 7 policy-setting meeting, expected to disclose clues about interest-rate cuts.

In late morning trading, the Dow fell 104.86, or 0.79%, at 13,217.27. The blue-chip average was led down by Acola Inc. (AA) and American Express Co. (AXP), falling 2.9% and 2.5%, respectively.

The Dow's minority advancing stocks include The Standard & Poor's 500 index was down 15.39, or 1.05%, at 1,451.40, and the Nasdaq composite index shed 30.21, or 1.18%, to 2,531.04. Bond prices rose, with the yield on the benchmark 10-year Treasury note falling to 4.55% from 4.57% on Monday.

Consumer confidence dropped to 105 in August.

Tuesday morning, the Conference Board released its report on consumer confidence in the month of August, showing that its consumer confidence index fell roughly in line with economist estimates. The report showed that the consumer confidence index fell to 105.0 in August from a downwardly revised 111.9 in July.

Economists had expected the index to drop to 104.5 compared to the 112.6 originally reported for the previous month. The Conference Board also said that the present situation index fell to 130.3 in August from 138.3 in July, as those claiming conditions are ‘good’ decreased to 26.4 percent from 28.3 percent and those saying conditions are ‘bad’ increased to 16.3 percent from 14.5 percent.

The report also showed that the expectations index declined to 88.2 from 94.4 in the previous month, as those expecting business conditions to worsen in the next six months rose to 10.6 percent from 8.2 percent. The labor market outlook was also less favorable, with those expecting more jobs in the months ahead falling to 13.0 percent from 13.8, while those expecting fewer jobs increased to 15.3 percent from 14.9 percent.


09:45AM Wall Street opened lower ahead of consumer-confidence data. Bank stocks weighed.

Wall Street declined at opening for a second day Tuesday, with investors nervous before a likely drop in consumer confidence and commentary from the Fed Reserve. The FOMC is expected to release the minutes of its Aug. 7 policy-setting meeting, which could give a clue about the central bank''s intentions before its next meeting in September.

At the last meeting, policymakers kept rates steady and pointed out that inflation remains its main concern despite credit-market turmoil and slowing housing market. The Fed has recently lowered the discount rate, the interest it charges banks.

Market sentiment was additionally hurt by losses in the shares of three giant investment banks. Citigroup (C) dropped 4.1%, Lehman Bros (LEH) fell 2.3% and Bear Stearns (BSC) declined 2.3% after Merrill Lynch cut its rating on the stocks to neutral from buy, citing the impact of debt market exposure. Street (STT) was another notable mover in the sector, falling 3.3% on a report it has exposure to $22 billion of asset-backed commercial paper conduits

In earnings-related news, Coronthian College (COCO) lost 0.4% after it reported a lower Q4 profit. Borders Group (BGP) is also expected to report a Q2 loss, due to stiff competition from rivals including Wal-Mart Stores and Amazon.com.

In the first hour of trading, the Dow Jones industrial average fell 69.58, or 0.52% to 13,252.55. The Standard & Poor''s 500 index was down 10.23, or 0.70%, at 1,456.56, and the Nasdaq composite index shed 19.20, or 0.75%, to 2,542.05.


09:00AM U.S. stock futures pointed to lower opening ahead of data.