Wall Street weighed by banks and home builders

NEW YORK (Reuters) - Wall Street stocks fell on Wednesday after disappointing new home sales data and a Federal Reserve rejection of a dividend plan by Bank of America weighed on banks and home building shares.

U.S. new home sales fell in February to a record low and prices were the lowest since December 2003, suggesting the housing market slide was deepening. For details, see STORY:

Bank of America Corp shares were down 2.2 percent at $13.59, weighing the most on the Dow index, after the Fed objected to the bank's plans to boost dividends in the second half of 2011 and told the bank to revise its proposal.

The KBW bank index fell 1.4 percent. Citigroup Inc shares dropped 1.4 percent at $4.36 and JPMorgan Chase & Co fell 1.1 percent to $44.96.

Among home builders, Toll Brothers Inc fell 1.6 percent to $20.16 and D.R. Horton Inc lost 1.4 percent to $11.68.

"What's been happening now for the past 18 months or so is we've seen a relative low in a lot of housing stocks, meaning they're bouncing along the bottom. That's typically a good sign since they tend to lead the housing market by three to nine months," said Adam Sarhan, chief executive of Sarhan Capital in New York. "As long as the recent lows aren't taken out, we'd expect some sort of stabilization to occur."

The Dow Jones industrial average was down 41.74 points, or 0.35 percent, at 11,976.89. The Standard & Poor's 500 Index was down 9.03 points, or 0.70 percent, at 1,284.74. The Nasdaq Composite Index was down 17.46 points, or 0.65 percent, at 2,666.41.

(Reporting by Angela Moon; Editing by Padraic Cassidy)