Stocks fall on weak housing numbers
NEW YORK – Wall Street fell for a third straight session Wednesday as fresh signs of a housing slump triggered concerns that the economy is slowing too fast and could erode corporate profits.
Investors believed that housing sales might be dropping more rapidly than anticipated and theorized that a soft landing for the U.S. economy might be more difficult to achieve. The report from the National Association of Realtors that sales of previously owned homes dropped in July to a pace of 6.33 million units, the lowest since January 2004.
The data comes after a Federal Reserve official hinted Tuesday that higher interest rates may still be needed to tame inflation, a move that could curtail consumer spending. Retailers and homebuilders, who have the most exposure to consumers, led major indexes lower.
“Housing is a relatively important number and clearly an area that has been a driver for the economy, and now we’re trying to figure out if the Fed is done or if it needs to do more,” said John Caldwell, chief investment strategist for McDonald Investments, the securities unit of Cleveland-based KeyCorp.
“The focus now is on housing as the market shifts away from inflation and toward growth,” he said. “The question is: Has the Fed done too much, and is housing going to lead us down?”
The Fed left interest rates unchanged earlier this month after increasing them 17 straight times during the past two years. The markets had rallied since then on hopes this would be the end of rate increases.
The Dow Jones industrial average fell 41.94, or 0.37 percent, to 11,297.90. Combined with Monday’s and Tuesday’s losses, the drop erased last week’s five-day rally, pushing the Dow 0.73 percent from Friday’s close.
Broader stock indicators also fell. The Standard & Poor’s 500 index fell 5.83, or 0.45 percent, to 1,292.99, and the Nasdaq composite index dropped 15.36, or 0.71 percent, to 2,134.66.
Bonds bounced, with the yield on the benchmark 10-year Treasury note touching a multiday high at 4.84 percent before dropping back to Tuesday’s close of 4.81 percent. The dollar was mixed against other major currencies, while gold prices moved lower.
Oil prices declined after U.S. government data showed rising supplies of gasoline as refiners increased output. Light sweet crude for October delivery fell $1.34 to $71.76 a barrel on the New York Mercantile Exchange.
U.S. homebuilder stocks, already trading near yearly lows as housing sales remain depressed this summer, pulled back after the housing data was released. Toll Brothers Inc. dropped 65 cents, or 2.6 percent, to $24.55. Pulte Homes Inc., the nation’s largest homebuilder fell $1.02, or 3.5 percent, to $28.09.
Declining issues outnumbered advancers by almost 2 to 1 on the New York Stock Exchange, where volume came to 1.224 billion shares, compared to 1.223 billion traded at the same point Tuesday. On the Nasdaq, decliners outnumbered advancers almost 2 to 1.
The Russell 2000 index of smaller companies tumbled 9.34, or 1.32 percent, to 698.42.
Overseas, Japan’s Nikkei stock average closed lower by 0.11 percent. Britain’s FTSE 100 closed down 0.69 percent, Germany’s DAX index fell 0.81 percent, and France’s CAC-40 was down 0.87 percent.