NEW YORK – Wall Street pulled back Monday, losing momentum from last week’s gains after news that sales of existing homes slipped in July for a fifth straight month stirred concerns about the strength of the economy.
Sales of existing homes slowed to their most sluggish pace in nearly five years, while home prices fell for a record 12th straight month. The National Association of Realtors reported that existing home sales slipped by 0.2 percent in July to a seasonally adjusted annual rate of 5.75 million units. Inventories rose 5.1 percent to a record 4.59 million units.
The pullback wasn’t a surpise given last week’s rally and that Wall Street is still trying to sort out concerns about failing mortgages and tighter access to credit for individuals and corporations.
A fresh round of buyout news might have acted to limit the stock market’s losses Monday, which were small compared to the triple-digit plunges the Dow Jones industrials suffered in early August. Stocks also pared their declines after the Chicago Federal Reserve reported that manufacturing activity in the Midwest ticked up 0.6 percent in July from June.
“I think there is still a little bit of nervousness about the credit market, but that seems to be abating slowly,” said Brian Gendreau, an investment strategist for ING Investment Management. “We had a very strong week last week, and I wouldn’t attribute this downmarket to any return to panic,” he said, referring to concerns about bad loans and a drying up of liquidity that upset markets in recent weeks. “I think it’s just a normal down day.”
The Dow fell 56.74, or 0.42 percent, to 13,322.13.
Broader stock indicators also declined. The Standard & Poor’s 500 index fell 12.58, or 0.85 percent, to 1,466.79, and the Nasdaq composite index fell 15.44, or 0.60 percent, to 2,561.25.
Bonds rose sharply, with the yield on the benchmark 10-year Treasury note falling to 4.57 percent from 4.62 percent late Friday. Bond prices move opposite their yields.
Last week was a strong one for the markets following weeks of volatility owing to worries that credit is shrinking to the point where it pinches economic and corporate growth. The Dow finished up 2.29 percent for the week, the S&P 500 advanced 2.31 percent, and the Nasdaq jumped 2.86 percent.
Gendreau contends investors last week gained a sense that the subprime and credit market problems weren’t necessarily going to sink the economy even though bad news on that front could still deal a setback.
“People realized, however severe the problems seemed to be in the credit area, that unless there’s some big macro impact from this, large multinationals with strong overseas revenue should be able to whether these conditions fairly well,” he said.