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Two stories. Both bad. Very bad.

AP:

Sales of existing homes plunged by a record amount in September as turmoil in mortgage markets added more problems to a housing industry in its worst slump in 16 years.

The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September, the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was also the slowest pace on record.

The weakness in sales translated into further pressure on prices. The median price _ the point at which half the homes sold for more and half for less _ fell to $211,700 in September, down by 4.2 percent from the sales price a year ago. It marked the 13th time out of the past 14 months that the year-over-year sales price has decreased.

The 8 percent decline in sales was bigger than the 4.5 percent decline that had been expected.

WaPo:

Merrill Lynch on Wednesday posted a loss of $2.2 billion -- its first quarterly loss since 2001 -- which coupled with a poor homes sales report and a turbulent stock market raised fears that weakness in housing and the financial system posed a bigger threat to the broader economy than previously thought.

The investment bank, whose loss was far worse than what the firm forecast less than three weeks ago, said it had to write down its collection of mortgage-backed assets by $7.9 billion, up from its earlier estimate of $4.5 billion. Some investors saw the Merrill loss as a sign that the financial industry still might not have a full grip on problems related to risky, subprime loans.

"We got it wrong," Merrill chairman and chief executive E. Stanley O'Neal said in a morning conference call with investment analysts. "We made a mistake. There were some errors of judgment made in the business itself and in the risk management function."

O'Neal left the door open to further write-downs, saying that the firm expected "market conditions for subprime mortgage-related assets to continue to be uncertain."

Combined with new data about flagging sales of existing homes, Merrill's disclosure pushed U.S. markets sharply lower, although the major indices recovered in the final hour of trading. A rally late in the day has been a common theme in the past several months of volatile trading, and some traders attributed Wednesday's recovery to program trades kicking in.

At some point I really would love it if someone could explain to me why every financial story is immediately framed in terms of the stock market. The health of the nation's economy can't be measured by the Dow Jones Industrial Index. This is obvious to everyone else, right? Right?