Stocks fell yesterday after the Federal Reserve raised its benchmark interest rate for the 11th consecutive time and indicated the "measured" pace of increases will continue following the economic damage of Hurricane Katrina.

Home builders such as D.R. Horton and retailers including Kohl's led the decline, erasing the market's earlier gains. Investors were concerned that higher rates and near-record energy prices will restrain consumer spending.

"They could have taken a break here and restarted in a quarter in light of Katrina, and that's why the market is reacting negatively," said Joseph Ranieri, managing director of over-the-counter trading at Adams Harkness in Boston. "The Fed is sending us a message that even a one-time pass on interest rates is not in the cards."

The Standard & Poor's 500-stock index fell 9.68, or 0.8 percent, to 1221.34. The Dow Jones industrial average dropped 76.11, or 0.7 percent, to 10,481.52. The Nasdaq composite index declined 13.93, or 0.6 percent, to 2131.33.

The central bank said the economy faces only a "near-term" setback after the hurricane struck the Gulf Coast three weeks ago.

Movers

D.R. Horton, the second-largest home builder by stock market value, slid $1.94, to $34.33. Pulte Homes, the largest, fell $1.93, to $41.97.

Kohl's fell $1.56, to $49.90, as a gauge of retail shares fell 1.8 percent and was the second-biggest drag on the S&P 500 among two dozen industry groups. Home Depot declined 82 cents, to $38.71. Target fell $1.39, to $50.84.

ConocoPhillips, the No. 1 U.S. oil refiner, fell $1.28, to $68.90, as crude oil prices scaled back. An index of energy shares was the biggest drag on the S&P 500.

Procter & Gamble, the largest U.S. household-products maker, gained 48 cents, to $56.04.

U.S. Steel, the biggest U.S. steelmaker, slumped $2.44, to $42.81, after issuing a disappointing third-quarter outlook.

Estee Lauder declined $4, to $36.48, after the cosmetics maker forecast lower earnings, citing rising energy prices and slow sales growth.

Indexes

New York Stock Exchange composite index fell 49.05, to 7562.84.

American Stock Exchange index fell 7.20, to 1722.24.

Russell 2000 index of smaller-company stocks fell 6.39, to 660.63.

Volume

NYSE: 2.31 billion shares, up from 2.07 billion on Monday. Decliners outnumbered advancers 11 to 5.

Nasdaq: 1.88 billion shares, up from 1.59 billion. Decliners outnumbered advancers 3 to 2.

Commodities

Crude oil for October delivery: $66.23, down $1.16.

Gold for current delivery: $466.20 a troy ounce, down from $466.70 on Monday.