Stocks fell for a second straight day Wednesday, as a drop in crude futures was overshadowed by a weak reading on the service sector of the economy that raised investor concerns about inflation.

The Dow Jones Industrial Average fell 123.75, or 1.2 percent, to 10,317.36. The Standard & Poor’s 500 Index fell 18.08, or 1.5 percent, to 1,196.39. The Nasdaq Composite Index fell 36.34, or 1.7 percent, to 2,103.02.

The Institute of Supply Management said its non-manufacturing business activity index showed a sharp slowdown in service sector growth, as well as a pickup in inflation in the sector. New orders fell to 56.6 percent from 65.8 percent in August, while the price index rose 14.3 points to a record 81.4 percent from 67.1 percent.

The service sector reading eclipsed a sharp drop in oil prices, as a barrel of light crude settled down $1.11 to $62.79 on the New York Mercantile Exchange.

Shares of homebuilders dropped for a second consecutive day after The New York Times reported Tuesday that executives at the 10 largest U.S. companies in the industry sold almost 11 million shares valued at $952 million so far this year, up from 6.8 million shares worth $658 million in all of the prior year. KB Home fell 4.3 percent to $67.42, while Ryland Group Inc. dipped 2.7 percent to $64.26.

Among other local movers, shares of OSI Systems Inc. slipped 3.1 percent to $15.05 after the Hawthorne-based security and inspection systems developer’s stock rating was downgraded to “strong sell” from “hold” by analyst Ivan Feinseth at Matrix USA.

IRIS International Inc. fell 1.3 percent to $20.70 after the Chatsworth-based urinalysis systems and medical devices manufacturer’s stock was cut to “hold” from “buy” by analyst Ernest W. Andberg at Feltl & Co. The company also announced that its Advanced Digital Imaging Research subsidiary received authorization from the National Institute of Standards and Technology to begin public testing of its 3-D face recognition technology.

And Computer Sciences Corp. dropped 2.7 percent to $45.71 on the same day that the El Segundo-based company said its DVC LLC subsidiary won a five-year, $35.1 million contract from the National Institutes of Health to develop candidates for a vaccine for tularemia, a disease that causes a fatal form of pneumonia.