Markets drop on home sales numbers
Stocks suffered their biggest pullback in two months Thursday, with the Dow Jones industrials logging a triple-digit decline as a lackluster home sales report and a disappointing bond auction halted the market’s two-day rally.
The market drifted lower for much of the session after the National Association of Realtors said sales of U.S. existing homes fell 0.8 percent in December to a seasonally adjusted annual rate of 6.22 million. Then, in the afternoon, a less-than-enthusiastic reception for the Treasury’s latest sale of five-year notes sent bond prices falling and yields rising sharply, rattling stock investors already worried about higher interest rates.
Stocks fell further while the yield on the 10-year Treasury note rose to highs not seen since the summer.
Earlier in the day, investors’ cheer over quarterly reports from eBay Inc., Nokia Corp., AT&T Inc. had failed to translate to gains as strong earnings news had done in previous days.
“We had a great run,” said Ryan Larson, senior equity trader at Voyager Asset Management, a division of RBC Dain Rauscher. “I think people are kind of tired right now and looking for other avenues.”
The Dow fell 119.21, or 0.94 percent, to 12,502.56.
Broader stock indicators also fell. The Standard & Poor’s 500 index fell 16.23, or 1.13 percent, to 1,423.90 and the Nasdaq composite index was down 32.04, or 1.30 percent, at 2,434.24. The pullback comes a day after the Nasdaq rose well over 1 percent and the Dow set record trading and closing highs. The Dow’s decline erased nearly all the previous two-day rally of about 145 points.
Bond prices fell in response to the auction and the Realtors’ news, which also showed the inventory of existing homes available for sale fell 7.9 percent to 3.51 million. The yield on the benchmark 10-year note jumped to 4.87 percent from 4.81 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices fell.
David Thompson, chief investment officer at Dwight Asset Management Co., said the data hinting at stability in the housing market unnerved the bond market because it could signal the economy is holding up better than expected and raise the specter of higher interest rates. He said some bond investors were surprised by the tepid response to the note auction.
“I think the market is just coming to grips with the fact that the economy is stronger than folks thought two months ago,” Thompson said.
Investors have wondered for months whether the housing sector and the broader economy could share a similar fate; that is, if a pullback in the housing market would drag down the rest of the economy.
Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.76 billion shares.
The Russell 2000 index of smaller companies was down 9.84, or 1.24 percent, at 784.19.
Overseas, Japan’s Nikkei stock average closed down 0.28 percent. Britain’s FTSE 100 closed down 0.72 percent, Germany’s DAX index fell 0.43 percent, and France’s CAC-40 was down 0.51 percent.