Share prices fell Monday for the first time in five sessions as remarks by two Federal Reserve officials added to worries that the country's economic expansion would slow in the face of a continuing sub-prime mortgage crisis.
Financial stocks led the decline after the Dow Jones industrial average last week rose nearly 391 points, or 3%, marking its biggest weekly point gain in more than four years.
Saying financial conditions had deteriorated more than she expected, Janet L. Yellen, president of the Federal Reserve Bank of San Francisco, labeled growth in the final three months of the year as "very meager" and warned that housing problems could "spill over" into consumer spending. And Boston Fed President Eric S. Rosengren said growth would slow for two quarters to "well below" its long-term pace.
The market appeared unsure about an effort encouraged by the Bush administration to stave off home foreclosures. Treasury Secretary Henry M. Paulson Jr. said the government was moving closer to an agreement with the mortgage industry to help thousands of homeowners avoid foreclosures by temporarily freezing their interest rates.
Investors also considered a report from the Institute for Supply Management that suggested that the pace of manufacturing growth slowed in November, but the reading was no worse than analysts expected.
"I think what we've got is a market that's trying to sort out whether we're seeing a big shift in the economic and investment fundamentals here or whether we're just going to continue to slog along," said Lincoln Anderson, investment chief at LPL Financial Services in Boston.
Also helping to depress share prices was a reduction by Citigroup of its profit estimate for General Electric, whose shares slid $1.36, or 3.6%, to $36.93.
The Dow index fell 57.15 points, or 0.4%, to 13,314.57. The Standard & Poor's 500 dropped 8.72 points, or 0.6%, to 1,472.42, and the Nasdaq composite fell 23.83 points, or 0.9%, to 2,637.13.
The Russell 2,000 index of smaller companies fell 7.8 points, or 1%, to 759.97.
Declining issues outpaced advancers by 4 to 3 on the New York Stock Exchange.
Signaling continued nervousness about the health of the U.S. financial system, investors again rushed into Treasury securities, driving yields down. The two-year T-note yield fell to 2.86%, down from 3.01% on Friday and the lowest since late 2004.
