U.S. stocks fell yesterday from their highest levels in almost a month as speculation dimmed that Hurricane Katrina would prompt the Federal Reserve to slow the pace of interest-rate increases.

"There have been some expectations in the market that the Fed would perhaps do, instead of three hikes, maybe two going forward," said Brian Williamson, a trader at Boston Co. Asset Management, which oversees $50 billion. "That optimism may have faded a little bit."

A rebound in oil prices also weighed on benchmarks, while housing stocks declined on a disappointing earnings forecast from Hovnanian Enterprises, New Jersey's largest home builder.

The Dow Jones industrial average fell 37.57, or 0.4 percent, to 10,595.93.

Broader indicators also declined. The Standard & Poor's 500-stock index dropped 4.69, or 0.4 percent, to 1231.67, as nine of 10 industry groups retreated. The Nasdaq composite index was down 6, or 0.3 percent, at 2166.03.

Since Katrina hit the Gulf Coast at the start of last week, a measure of energy stocks in the S&P 500 has gained 6.6 percent through yesterday on optimism of higher refining profits. Home Depot has gained 5.3 percent, leading a rise in companies that stand to benefit from the rebuilding.

The Congressional Budget Office yesterday estimated that Hurricane Katrina will slow U.S. economic growth by as much as 1 percentage point over the rest of the year, with the cost of relief operations climbing to as much as $200 billion.

Movers

Hovnanian fell $4.10, to $57.49. Rivals also fell. Centex dropped 94 cents, to $67.64. KB Home fell $1.20, to $74.69. Toll Brothers lost $1.58, to $47.27.

Sears Holdings fell $7.04, to $127.81, after Chairman Edward S. Lampert ousted chief executive Alan J. Lacy.

Apple Computer rose $1.10, to $49.78, on a new iPod model and an iTunes-compatible cell phone.

EBay fell $1.53, to $38.93, on reports that it is in talks to buy Web phone company Skype Technologies.

National Semiconductor climbed $1.44, to $26.05, on higher sales.

Indexes

New York Stock Exchange composite index fell 30.60, to 7594.64.

American Stock Exchange index rose 5.28, to 1696.08.

Russell 2000 index of smaller-company stocks fell 3.85, to 673.47.

Volume

NYSE: 1.95 billion shares, down from 2.05 billion on Wednesday. Decliners narrowly outnumbered advancers 8 to 5.

Nasdaq: 1.61 billion shares, up from 1.51 billion. Decliners narrowly outnumbered advancers 3 to 2.

Commodities

Crude oil for October delivery: $64.49, up 12 cents.

Gold for current delivery: $446.70 a troy ounce, up from $444.90 on Wednesday.