Bond prices soared as investors again sought the safety of government debt, sending yields to multi-month lows. The yield on the 10-year Treasury note, which moves inversely to its price, fell to 4.47 percent, its weakest level since March 14, and down from 4.56 percent at Tuesday's close.

The National Association of Realtors said pending sales of existing homes fell in July to the lowest level in nearly six years. Though the report did support the argument for a rate cut, it also worried investors who are nervous about the housing market growing so weak that it drags the economy into recession.

The Fed's Beige Book, which describes economic conditions in regions around the country, said that while upheaval in the financial markets has made the housing slump worse, the overall economy hasn't been widely harmed. Wall Street appeared disappointed that the Beige Book's findings didn't deliver a sure-bet for a rate cut, which markets have been pining for.

"The markets are reacting to absolutely every bit of information which is coming along tick by tick," said Walter Gerasimowicz, chairman and chief executive of Meditron Asset Management in New York, downplaying the market's initial pullback after release of the Beige Book as an overreaction. "I'm happy to see that the underlying economy is still in fairly sound mode."

He noted that had the Beige Book shown a weakened economy investors might have been enthusiastic about the increased chance for a rate cut but grown more concerned about the prospect of a faltering economy.

The downcast mood on Wall Street Wednesday ran counter to a somewhat more upbeat mood of recent sessions. The Dow Jones industrial average rose in three of the last four sessions, jumping 91 points Tuesday, as investors sought stocks that have been turned into bargains by declines.

According to preliminary calculations, the Dow ended down 143.39, or 1.07 percent, at 13,305.47, after having fallen as much as 200 points in the session.

Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 17.13, or 1.15 percent, to 1,472.29, and the Nasdaq composite index fell 24.29, or 0.92 percent, to 2,605.95.

The dollar was mixed against other major currencies, while gold prices slipped.

Investors' concerns about spreading fallout from market turmoil also intensified after the European Central Bank said it would consider steps to curb recent euro money market upheaval. The statement was a sign the ECB might not lift its benchmark interest rate when it meets Thursday; there had been speculation it would raise the rate a quarter percentage point to 4.25 percent.

In the U.S., the Fed has held rates steady for more than a year in a bid to reduce inflation that remains above its comfort level. Investors concerned about a stumbling housing market, rising mortgage defaults and tightening access to credit have been hoping the Fed will reduce its benchmark fed funds rate when it meets Sept. 18.

"It seems like every day you've got some news that subprime and some of the effects of the housing impact aren't quite so bad and the next day you've got something that says it is worse than we thought in another area. I just think it's a continuation of the choppines## He said Wall Street could take months to sort out its concerns about issues such as bad subprime loans, which are made to borrowers with weak credit.

Gerasimowicz noted that the key three-month interbank lending rate, or LIBOR, rose Wednesday to 5.72 percent, its highest level since January 2001. He noted that a month ago the rate was 5.36 percent and that the increase illustrates that short-term rates are still under pressure. The rise is significant because many consumer loans are tied to this rate.

"The market remains very unpredictable and a lot of that has to do with the subprime debacle that we're facing," he said.

Still, Gerasimowicz remains optimistic, describing the recent market volatility as merely a "financial pothole" in a larger worldwide growth cycle.

In corporate news, Mattel Inc. announced a third major recall of Chinese-made toys in little more than a month because of excessive amounts of lead paint. The world's largest toy maker said the move affects about 800,000 toys. Mattel rose 1 cent $21.98.

Apple Inc. fell $7.40, or 5.1 percent, to $136.76 after investors were disappointed about newly announced versions of the company's iPod digital media players.

Costco Wholesale Corp., the warehouse retailer, fell $2.61, or 4.2 percent, to $59 after reporting its August same-store sales rose a weaker-than-expected 2 percent largely due to strong international sales. Same-store sales, or sales at stores open at least a year, are a widely followed indicator of retail health.

Most major retailers will be reporting their August sales on Thursday.

Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.39 billion shares compared with 1.37 billion shares traded Tuesday.

The Russell 2000 index of smaller companies fell 10.23, or 1.28 percent, to 790.46.

Crude futures rose 65 cents to settle at $75.73 per barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average fell 1.60 percent. Britain's FTSE 100 closed down 1.66 percent, while Germany's DAX index declined 1.73 percent, and France's CAC-40 tumbled 2.14 percent.

———

On the Web:

New York Stock Exchange: www.nyse.com