Dawn Chorus: Dismal home-sales data trigger Wall Street sell-off

US stocks plunged to their lowest level in seven weeks on Tuesday as a record decline in home sales cast further doubt on the viability of the economic recovery.

At the close, the Dow Jones industrial average was down 134 points, or 1.32%, to 10,040. The broader Standard & Poor’s 500-stock index declined 15 points, or 1.45%, to 1,052, and the Nasdaq fell 36 points, or 1.66%, to 2,124.

The National Association of Realtors said in its report that sales of previously owned homes in the US declined 27.2% to a 3.83 million annual rate last month – the lowest level in more than a decade.  The figures compare with the median forecast of a 4.65 million rate and 13.4% decline, according to a Bloomberg News survey.

Eight of the 10 main sectors of the S&P 500 declined in a broad-based sell-off, with seven down more than 1%. Defensive plays telecoms and utilities were the only sectors to gain for the day.

Alcoa Inc., Caterpillar Inc. and Boeing Co. lost at least 2.7% to lead declines in the Dow. Dell Inc. plunged 3% amid reports it will raise its offer for 3Par Inc.

European stocks dropped to a one-month low after the release of a gloomy US home-sales data, setting the tone for Wall Street even before the opening bell. In London, the FTSE 100 was down 79 points, or 1.5%, while the DAX in Frankfurt fell 76 points, or 1.2%. The CAC 40 in Paris was 62 points, or 1.75%, lower. The pan-European FTSEurofirst 300 index closed down 1.6% at 1,019 points

In Asia, stocks dropped amid speculation a US home sales report on Tuesday will provide more evidence the global economy is faltering. The Nikkei 225 Average tumbled into a bear market sliding 1.3% to 8,995 as domestic woes and global growth fears combined to hammer stocks. Tokyo’s broader Topix index declined 0.9%, while the MSCI Asia Pacific Index sank 0.8%.