Wall Street saw the Commerce Department's report on durable goods — big-ticket items designed to last at least three years — as another in a line of signs that consumer spending could dry up and further harm an already decelerating economy. Orders for durable goods fell 2.1 percent in September, far more than the 1.5 percent drop economists had forecast.

"We're starting to see some slowing in the economy," Dirk van Dijk, director of research at Zacks Investment Research Inc. "I don't think we're going into a recession, but (Federal Reserve Chairman-nominee Ben) Bernanke is going to have his hands full."

Investors also remained concerned that the Fed, in raising interest rates to quash inflation, will further slow economic growth and company earnings by making capital more expensive for companies looking to expand. The Fed next meets Nov. 1 and is widely expected to raise the nation's benchmark lending rate by a quarter percentage point to 4 percent.

The Dow fell 115.03, or 1.11 percent, to 10,229.95.

Broader stock indicators also lost ground. The Standard & Poor's 500 index dropped 12.48, or 1.05 percent, to 1,178.90, and the Nasdaq composite index lost 36.24, or 1.73 percent, to 2,063.81.

Crude oil futures moved higher. A barrel of light crude settled at $61.09, up 43 cents, on the New York Mercantile Exchange.

Bonds rose solidly, with the yield on the 10-year Treasury note falling to 4.55 percent from 4.59 percent late yesterday. Bonds were pummeled in the early half of the week as investors worried about interest rates and inflation. The U.S. dollar was lower against other major currencies in European trading. Gold prices were higher.

In other economic news, new home sales rebounded at a faster-than-expected pace in September, rising 2.1 percent. However, new home sales are well below the year's highs and the median price of new homes sold last month fell by 5.7 percent, indicating that the booming housing market may be slowing.

Traders are watching home sales carefully, worried that a decline in housing prices might curb consumer spending. Outgoing Federal Reserve Chairman Alan Greenspan has said borrowing against homes added $600 billion to consumers' spending power last year. A sustained decline in home prices would "shut down the housing ATM, which is massive," van Dijk said.

Even if home sales stay strong, investors will continue to worry about consumer spending. In a report yesterday, Lehman Brothers called rising home prices, low mortgage rates and declining energy prices "props to consumer spending" that could weaken or collapse at some point in 2006.

A stop to the Fed's policy of consistent interest rate hikes could prevent that, but much of the volatility in the market over the past two weeks comes as investors debate whether the Fed is ready to stop raising rates, or will keep going as still-high energy costs stoke inflation.

"Volatility is finally picking up, and that's because of the uncertainties you're seeing not only over interest rates, but energy prices as well," said Chris Wiles, managing senior director at the Allegiant Funds. "You hope that they start to signal a change in rates soon, but in the end, and with energy prices, you just don't know right now."

Exxon Mobil Corp. lost 60 cents to $55.60 despite reporting its best quarterly profit ever. The oil company's third-quarter profits were buoyed by higher crude oil and natural gas prices, even as the period's hurricanes hampered production. But earnings excluding items fell below analysts' expectations.

Goodyear Tire & Rubber Co., one of the world's largest tire makers, rose $1.97, or 15 percent, to $15.35 after its third-quarter profit surged to the highest quarterly level in seven years, as higher prices and new products helped offset increased raw materials costs and boosted sales 7 percent.

General Motors Corp. shares lost $1.98 to $27.19 after the company said it received a Securities and Exchange Commission subpoena for documents about pensions and post-retirement benefits, as well as its dealings with parts maker Delphi Corp.

Shares of Baidu.com Inc. plunged $10.70, or 13 percent, to $70.35 after the Internet company posted quarterly earnings that beat analysts' expectations but still disappointed investors who had bet on even faster growth for the biggest online portal in the booming Chinese market.

Decliners led advancers by nearly 3 to 1 on the New York Stock Exchange, where preliminary consolidated volume came to 2.41 billion shares, down from 2.48 billion traded yesterday.

The Russell 2000 index of smaller companies fell 14.38, or 2.25 percent, to 624.03.

Overseas, Japan's Nikkei stock average rose 0.16 percent. Britain's FTSE 100 fell 0.86 percent, Germany's DAX index was down 1.93 percent, and France's CAC-40 fell 1.73 percent.