U.S. AVERAGES

Stocks dropped Tuesday morning, while investors expected the data on existing home sales to give a focus to the market. Advancing oil prices also weighed on stocks. Crude oil rose to $65.97 on lingering worries about disruptions in global supply.

Google is getting ready to launch its own instant-messaging system, according to reports. The system is said to be named Google Talk and may be released this Wednesday.

Williams-Sonoma's 2Q profit climbed 12% on growth at the company’s catalog and Internet business and higher same-store sales at Pottery Barn.

CarMax lifted its 2Q outlook, saying it now expects to make about 37 cents per share on increased customer traffic, strong execution and its consumer-preferred market offer. Earlier the company had forecast a profit of 29-34 cents per share.

Toro reported a 3Q profit of 74 cents per share, beating views of 69 cents per share. Toro sees full-year sales growth at 9%-11%.

Pier 1 Imports cut its 2Q outlook due to worse-than-expected comparable store sales trends and heavy promotional activity. The company expects a loss for the period 12-14 cents per share.

Shares of Harrah's Entertainment Inc. (HET: chart) will be also watched after the world's No.1 casino operator announced on Monday that it plans to buy Imperial Palace Hotel & Casino in Las Vegas for $370 million.

INTERNATIONAL MARKET NEWS

Tokyo's Nikkei 225 added 20.42 points, 0.16%, at 12,472.93, but couldn't hold the 12,500 level it broke in the morning. Hong Kong's Hang Seng index declined 1.7%, the Seoul Composite fell 0.1% and Australia's All Ordinaries dropped 0.25%.

European stocks declined on Tuesday, dragged down by a narrowly higher close on U.S. equity markets and oil prices moving toward $66 a barrel, though the higher German ZEW economic-sentiment indicator offered some support.

The German DAX 30 lost 0.67% at 4,908, reviving from daily lows, after the forward-looking German ZEW indicator of economic sentiment recorded a reading of 50, up vs. 37 in July and above views of an increase to 38.8.

Other major European indices were also lower, with the French CAC 40 dropping 0.80% to 4,449 points and the British FTSE 100 down 0.33% at 5,300.

ECONOMIC NEWS

The housing market continues to fuel the economic expansion in the U.S. The July existing home sales were estimated 2.6% lower to 7.16 million from revised 7.35 million in June. The median existing-home price across all housing categories was $218,000.

ENERGY, METALS AND CURRENCIES MARKETS

Oil prices edged above the $65 a barrel mark. The October light crude futures contract for NYMEX advanced 16 cents to $65.81 a barrel, while the October contract for Brent crude was up 4 cents to $64.54.

The dollar regained strength and was last up 0.4% at 110.06 yen, while the euro added 0.05% to $1.2228.

The benchmark Treasury 10-year note was last down 2/32 at 100-8/32 with a yield of 4.221%, ahead of the home sales data.

The Energy Department reported Monday that the retail price of gasoline climbed more than 6 cents last week to an average $2.61 a gallon nationwide, hitting a new record. The previous record high was $2.55 per gallon, set the previous week. Adjusting for inflation, retail gasoline prices topped $3 a gallon in March 1980.

EARNINGS NEWS