Lennar Corp. and Toll Brothers Inc. led builders lower after construction of single-family homes plunged to the lowest level in a quarter century. Caterpillar Inc., the largest maker of bulldozers, lost 4.2 percent. American International Group Inc. slid 8.2 percent as the Federal Reserve said it needed to tap two-thirds of its $122.8 billion credit line.
The S&P 500 lost 8.47 points, or 0.89 percent, to 937.69 at 10:21 a.m. in New York. The Dow Jones Industrial Average dropped 96.14, or 1 percent, to 8,883.48. The Nasdaq Composite Index fell 14.19, or 0.83 percent, to 1,703.84.
The S&P 500 has climbed 4.7 percent this week as money- market rates dropped and prospects of a government bailout of bond insurers lifted financial shares. The index is still down 37 percent in 2008 as losses and writedowns from mortgage- related investments at banks worldwide swelled to $660 billion. The Dow has added 5.2 percent this week.
Canadian stocks have rebounded from two days slide as the price of oil rise. The S&P/TSX rose 0.87 percent to 9,350.59 at 10:21 a.m. in Toronto.
European stocks rose, with the Dow Jones Stoxx 600 Index rebounding from its steepest two-day retreat since 1987, on better-than-estimated earnings from Google Inc. and Sony Ericsson Mobile Communications Ltd. and lower money-market rates.
National benchmark indexes gained in all 18 western European markets except Austria, Greece and Iceland. The U.K.'s FTSE 100 added 2.1 percent, and France's CAC 40 rose 1.3 percent. Germany's DAX increased 1.1 percent.
Japanese stocks rebounded from their worst plunge in two decades as the deepening financial crisis prompted investors to buy companies whose earnings are insulated from a slowdown in overseas markets. The Nikkei 225 Stock Average climbed 235.37, or 2.8 percent, to close at 8,693.82 in Tokyo.
Australian stocks fell as mining companies fell. The S&P/ASX 200 Index dropped 42.60 points, or 1.1 percent, to 3,970.80 at the close in Sydney.
Indian stocks fell, with the benchmark Sensitive Index declining to its lowest in more than two years on speculation that overseas funds faced with redemptions are selling the nation's equities. The Bombay Stock Exchange's Sensitive Index, or Sensex, fell 606.14, or 5.7 percent, to 9,975.35, its lowest since June 20, 2006.
China's stocks rose for the first time in four days after the regulator said it would take measures to stabilize the country's financial markets. The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, rose 12.36, or 0.7 percent, to 1,833.26 at the close, snapping a three-day, 8.3 percent retreat.
Russian stocks fell after Finance Alexei Kudrin predicted further declines for the country's equities market because of the global credit crisis. he ruble-denominated Micex Index sank 5.7 percent to 590.97 after earlier advancing as much as 6.4 percent.