Wall Street was lower in early afternoon trade after Janet Yellen, president of the San Francisco Fed said in a speech that interest rate policies should not be used to bail out investors even though market upheavals could hurt the economy, causing investors to worry that interest rates might not drop this month, as many had assumed.
Analysts said that if the Fed does not reduce rates the markets could see a major sell-off.
The Dow Jones Industrial Average was 0.38 percent lower to 13,064.04, while the Nasdaq Composite had dropped 0.63 percent to 2,549.43 and the S&P 500 was down 0.63 percent as well, to 1,444.37.
House builders saw major declines after Moody’s Investors Services said that the housing slump will likely last at least until 2009.
Hovnanian Enterprises (NYSE: HOV) was down 5.3 percent to $10.01 after its target share price was cut from $20 to $8 by JMP Securities in the wake of last week’s reported third-quarter losses.
Other declines in the sector included KB Home (NYSE: KBH), which was 4.7 percent lower to $26.62.
Pulte Homes (NYSE: PHM) dropped 3.1 percent to $15.02, Lennar (NYSE: LEN) fell 2.9 percent to $25.74, and Toll Brothers (NYSE: TOL) was down 2.4 percent to $19.85.
Mortgage lender Countrywide Financial (NYSE: CFC) was 5.4 percent lower to $17.22 after Friday’s report that it will cut up to 12,000 jobs in an effort to rise above the sector’s problems and after it said it believes new mortgages will fall by 25 percent next year.
Gainers on the day included Apple (NAS: AAPL; LSE: ACP; FWB: APC), which added 2.7 percent to $135.20 on the news that it sold its 1 millionth iPhone Sunday.