A softening in the real estate market, which had helped fuel economic growth for more than two years, could mean weaker consumer spending and a slowdown in the economy. Toll Brothers' lower sales projections fed those fears, while disappointing forecasts from auto parts maker Visteon Corp. dragged down the auto sector as well.

Despite Wall Street's two-week upswing, the news illustrated the problems that still face the economy and the stock market. Yet even amid the market's lingering worries, investors' expectations of a year-end rally kept the day's losses limited.

"With the Dow and Nasdaq having moved up the way they have, it's only normal to see a bit of a pullback from time to time," said Michael Sheldon, chief market strategist at Spencer Clarke LLC. "But you still have a lot of seasonal factors to come into play. November through January has historically been great for stocks, and I think it'll be almost a self-fulfilling prophecy as investors start trickling back into the market."

According to preliminary calculations, the Dow Jones industrial average fell 46.51, or 0.44 percent, to 10,539.72. The Dow had gained 179.46 over the previous four sessions.

Broader stock indicators also fell. The Standard & Poor's 500 index dropped 4.22, or 0.35 percent, to 1,218.59, and the Nasdaq composite index lost 6.17, or 0.28 percent, to 2,172.07.

The bond market rallied, with the yield on the 10-year Treasury note falling to 4.55 percent from 4.63 percent late Monday. The dollar made gains against other major currencies, while gold prices moved higher in Europe as the rioting in France prompted investors to buy.

Oil prices moved higher, with a barrel of light crude settling at $59.71, up 24 cents, on the New York Mercantile Exchange. Yet while oil prices remain below $60 per barrel, energy prices remain near historic highs and will continue to pressure consumers.

Toll Brothers said softening demand and moderating house prices would result in fewer new home sales in 2006 and would likely cut into full-year profits. The company also blamed a tougher regulatory environment and waning consumer confidence for the lower projections. Investors nervous about the health of the housing market punished Toll shares, sending them plummeting $5.50, or 14 percent, to $33.91.

"That shouldn't have been a surprise to anyone, because all the background was in place for that to happen what with rising interest rates and consumer spending where it's at," said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers. "We may be seeing the beginning of a real slowdown in the housing market. That's a big concern hanging out there."

Other homebuilders suffered along with Toll. Lennar Corp. lost $3.05 to $55.30, KB Home slid $3.71 to $63.74 and Meritage Homes Corp. tumbled fell $7.38 to $58.27.

Visteon fell $1.26, or 14 percent, to $7.72 after narrowing its quarterly loss from a year ago. The struggling auto parts maker said, however, it does not expect to return to profitability in the fourth quarter even after a sweeping restructuring with the aid of Ford Motor Co. Ford fell 8 cents to $8.26.

Sales at McDonald's Corp. outlets rose 3.9 percent in October, the company said, with strong growth seen in Asia, the Middle East and Africa. Sales at stores open at least 13 months rose 3.3 percent despite a number of store closures due to the hurricane damage along the Gulf Coast. McDonald's added 30 cents to $34.

Swiss drug maker Serono SA jumped $1.53 to $17.97 after the company hired Goldman Sachs Group Inc. to explore "strategic alternatives," including a possible sale of the company.

Linens N Things Inc. agreed to a $1.3 billion takeover bid from Apollo Management LP, a private investment firm, which agreed to pay $28 per share in cash for the home goods retailer. Linens N Things nonetheless lost 44 cents to $25.96.

Declining issues outnumbered advancers by nearly 5 to 3 on the New York Stock Exchange, where volume came to 1.41 billion shares, compared to 1.47 billion traded at the same point on Monday.

The Russell 2000 index of smaller companies fell 5.01, or 0.76 percent, to 656.23.

Overseas, Japan's Nikkei stock average fell 0.18 percent. In Europe, Britain's FTSE 100 was little changed at the close, France's CAC-40 was flat for the session, and Germany's DAX index lost 0.31 percent.