Recession worry hits Wall Street

NEW YORK (Reuters) - Stocks traded moderately lower in choppy trade on Friday on a report that new-home construction fell to a 17 1/2-year low last month, adding to recession fears and offsetting reassuring profits from Google Inc and other companies.

A report on U.S. consumer confidence from Reuters and the University of Michigan showed the steepest monthly drop on record in October. Consumer spending accounts for two-thirds of economic activity.

The government's housing report also showed permits for new homes sunk to a nearly 27-year low in another sign of deterioration in housing that has sparked the credit crisis and helped drive stocks to five-year lows.

Investors sold shares of home builders, including Pulte Homes , which was down nearly 5 percent. Major manufacturers also fell, with Caterpillar Inc off more than 5 percent and Honeywell International Inc , which slashed its profit outlook, down nearly 7 percent .

"The economic news in general over the past two days, including today's housing starts, is on the negative side and that seems to be what's pushing the market down," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Wealth Management in New York.

"At the same time there is some interest in getting into certain types of names, given how much of a correction we've seen so far."

The Dow Jones industrial average <.DJI> fell 72.08 points, or 0.80 percent, to 8,907.18. The Standard & Poor's 500 Index <.SPX> declined 6.66 points, or 0.70 percent, to 939.77. The Nasdaq Composite Index <.IXIC> shed 7.52 points, or 0.44 percent, to 1,710.19.

Google Inc's stock rose after it gave quarterly forecasts above Wall Street's estimates late on Thursday. Its shares rose 7 percent to $379.73.

Shares of Caterpillar, which makes heavy equipment, fell $40.55 on the New York Stock Exchange. Honeywell shares slid to $28.85.

Shares of United Technologies , another big manufacturer, dropped nearly 3 percent to $51.34.

Pulte Homes declined to $10.18, while the Dow Jones home construction index <.DJUSHB> fell almost 4 percent.

On Nasdaq, shares of Apple Inc , maker of the iPod and iPhone, fell nearly 4 percent to $98.32.

Warren Buffett, writing in the New York Times, said he is buying U.S. stocks, encouraging some investors to scour the market for beaten-down shares. For details, see [ID:nBNG69229]. The richest American is head of Berkshire Hathaway Inc .

(Editing by Kenneth Barry)

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