Stocks eased Tuesday as slowing advertising growth at Yahoo and a drop in home construction suggested that the economy was losing momentum.
Treasury bond yields tumbled in advance of today's Federal Reserve meeting, after a benign inflation report cemented expectations that policymakers would hold their benchmark interest rate steady.
In commodities trading, oil prices fell to new six-month lows.
Wall Street began to slide early in the session, after Yahoo warned that sales this quarter would be at the low end of the company's forecast range on weaker advertising demand from automakers and financial service companies.
Stocks reached the day's lows after Thailand's military seized control of the country and the prime minister declared a state of emergency, stoking concern about potential losses in foreign equity markets.
But the U.S. market revived in the afternoon, and major indexes finished with relatively minor declines.
Still, "the market's vulnerable" after its recent run-up, said David Briggs, a trader at Federated Investment Management in Pittsburgh. "People begin to wonder about the psyche of the average consumer and how it might slow up the economy."
The Dow Jones industrial average ended with a loss of 14.09 points, or 0.1%, at 11,540.91, after being down as much as 75 points.
The Standard & Poor's 500 index slipped 2.87 points, or 0.2%, to 1,318.31.
The Nasdaq composite index fell for the first time in eight days, declining 13.38 points, or 0.6%, to 2,222.37. The gauge last rose for seven consecutive sessions in the period ended Jan. 11.
Stocks opened weak after the government said a glut of unsold homes spurred a 6% plunge in housing starts in August. Losses accelerated after Yahoo's sales warning.
Yahoo ended the day off $3.25, or 11.2%, to $25.75 for the biggest decline in the S&P 500.
Among other Internet-related shares, Google slid $10.88 to $403.81, Amazon.com lost 50 cents to $31.58 and Baidu.com was down $3.86 to $85.11.
But the tech sector got some good news after regular trading ended: Oracle surged $2.15 to $18.28 in extended trading after the software maker said profit excluding some costs was 18 cents a share in its fiscal first quarter, beating Wall Street's average forecast of 16 cents.
Shares of home builders declined after the Commerce Department said builders started work on homes at an annual rate of 1.665 million last month, down from a 1.772-million pace in July and well below forecasts.
Toll Bros., the biggest luxury home builder, slumped 74 cents to $27.42. Centex dropped $1.34 to $52.32.
"The lower-than-expected housing starts data raised the specter that the economy is slowing deeper than thought, corporate profits may slow and stocks are not as fairly valued as investors thought they were," said Ken Tower, chief market strategist at CyberTrader Inc.
But there was upbeat news on inflation: The Labor Department said producer prices rose 0.1% in August, matching the July increase. Economists had forecast a 0.2% gain.
The report made it all but certain that the Fed today would keep its key short-term rate at 5.25%. Treasury bond yields fell on the inflation news, with the 10-year T-note ending at 4.73%, down from 4.81% on Monday.
Another drop in oil prices also boosted optimism that inflation would stay under control. In New York trading, crude for October delivery slid $2.14 to $61.66 a barrel, the lowest since March 21, on expectations that inventories would continue to rise.
An index of energy stocks retreated 1.6%. Exxon Mobil fell 80 cents to $65.50 and Valero Energy was down $2.25 to $50.10.
In other market highlights:
* Latin American stock markets were hurt initially by the report of the Thai coup but recovered much of their declines. Mexico's IPC index ended nearly unchanged; Argentina's Merval index fell 0.7%.
Early today, Asian markets were mostly lower, but the selling appeared restrained. The Thai market was closed.
* Cheesecake Factory fell 46 cents, to $25.64, after the restaurant chain was cut to "underweight" from "neutral" by JPMorgan analyst John Ivankoe.
* Dow Jones, publisher of the Wall Street Journal, fell $1.08 to $32.79 after it cut its third-quarter earnings forecast because of declining ad revenue.
* ImClone Systems plunged $1.36 to $29.16. The biotechnology company lost a court ruling that might result in the company paying royalties on its experimental cancer drug Erbitux to an Israeli research institute.
Billionaire financier Carl Icahn is poised to gain control of one-third of ImClone's board and push to replace management at the company's annual meeting today.
* Walt Disney rose 41 cents to $30.47 for the biggest advance in the Dow. Chief Executive Robert Iger expects the company to sell $50 million worth of movies on Apple Computer's iTunes website this year.