U.S.stocks and exchange traded funds (ETFs) took a dip into negative territory this morning as investors tried to assess the overall health of the economy on a not-so-upbeat housing report.

A day after the Federal Reserve announced that economic activity is improving, the National Association of Realtors said that existing home sales fell 2.7% in August, compared to a gain of 7.2% in July, snapping a four-month rally.  The number of home sales fell to an annual rate of 5.10 million units as compared to expectations of 5.35 million units.  The news sent the iShares Dow Jones U.S. Real Estate (NYSEArca: IYR) down 3.5% in morning trading.

The Labor Department reported that the number of newly laid-off workers seeking unemployment benefits fell for a third week. Initial claims for unemployment insurance fell by 21,000 to 530,000, much lower than the 550,000 expected by economists and an indicator that the economy is stabilizing.

Scott Lanman of Bloomberg states that the Federal Reserve plans to reduce its emergency programs that auction loans to commercial banks and Treasury securities to bond dealers as the financial markets continue to improve.  Additionally, Fed policymakers committed to complete their $1.25 trillion in purchases of mortgage securities and extended the end-date of the program to March from December.

Black gold fell sharply in morning trading as a government report showed a larger-than-expected buildup in crude supplies.  Additionally, oil demand fell by 3% and gasoline supplies surged by more than 5 million barrels even though refineries took in 316,000 fewer barrels of crude each day.  The United States Oil Fund (NYSEArca: USO) was down 2.9% in morning trading.

All three major U.S. indexes are in the red, with the Dow Jones Industrial Average dropping 0.4%, the S&P 500 giving up 0.8% and the Nasdaq declining by 1.1%.

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Kevin Grewal contributed to this article.

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