Home sales report jolts markets
Stocks finished sharply lower Wednesday as a jittery Wall Street sold off on a report showing a large drop in pending home sales and read anecdotal data from the Federal Reserve’s regional banks as offering little more assurance that an interest rate cut is likely. The Dow Jones industrial average dropped more than 140 points.
Bond prices soared as investors again sought the safety of government debt, sending yields to multi-month lows. The yield on the 10-year Treasury note, which moves inversely to its price, fell to 4.47 percent, its weakest level since March 14, and down from 4.56 percent at Tuesday’s close.
The National Association of Realtors said pending sales of existing homes fell in July to the lowest level in nearly six years. Though the report did support the argument for a rate cut, it also worried investors who are nervous about the housing market growing so weak that it drags the economy into recession.
The Fed’s Beige Book, which describes economic conditions in regions around the country, said that while upheaval in the financial markets has made the housing slump worse, the overall economy hasn’t been widely harmed. Wall Street appeared disappointed that the Beige Book’s findings didn’t deliver a sure-bet for a rate cut, which markets have been pining for.
“The markets are reacting to absolutely every bit of information which is coming along tick by tick,” said Walter Gerasimowicz, chairman and chief executive of Meditron Asset Management in New York, downplaying the market’s initial pullback after release of the Beige Book as an overreaction. “I’m happy to see that the underlying economy is still in fairly sound mode.”
He noted that had the Beige Book shown a weakened economy investors might have been enthusiastic about the increased chance for a rate cut but grown more concerned about the prospect of a faltering economy.
The downcast mood on Wall Street Wednesday ran counter to a somewhat more upbeat mood of recent sessions. The Dow Jones industrial average rose in three of the last four sessions, jumping 91 points Tuesday, as investors sought stocks that have been turned into bargains by declines.
The Dow ended down 143.39, or 1.07 percent, at 13,305.47, after having fallen as much as 200 points in the session.
Broader stock indicators also lost ground. The Standard & Poor’s 500 index fell 17.13, or 1.15 percent, to 1,472.29, and the Nasdaq composite index fell 24.29, or 0.92 percent, to 2,605.95.
The dollar was mixed against other major currencies, while gold prices slipped.
Investors’ concerns about spreading fallout from market turmoil also intensified after the European Central Bank said it would consider steps to curb recent euro money market upheaval. The statement was a sign the ECB might not lift its benchmark interest rate when it meets Thursday; there had been speculation it would raise the rate a quarter percentage point to 4.25 percent.
Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.39 billion shares compared with 1.37 billion shares traded Tuesday.
The Russell 2000 index of smaller companies fell 10.23, or 1.28 percent, to 790.46.
Crude futures rose 65 cents to settle at $75.73 per barrel on the New York Mercantile Exchange.
Overseas, Japan’s Nikkei stock average fell 1.60 percent. Britain’s FTSE 100 closed down 1.66 percent, while Germany’s DAX index declined 1.73 percent, and France’s CAC-40 tumbled 2.14 percent.