Stocks reverse course after big advance
NEW YORK – Wall Street gave up a big advance and turned lower Monday as investors suffered a renewed case of the jitters ahead of the Federal Reserve’s meeting on interest rates later this week.
The stock market, which has seen huge swings in recent weeks, was initially relieved to hear from the National Association of Realtors that existing home sales declined in May by only 0.3 percent to 5.99 million units. The tepid reading was expected, and it indicated that the housing sector is still weak: The pace of existing home sales was the slowest in four years; housing inventories rose by 5 percent to the highest level since 1992; and the median home price fell for a record 10th consecutive month.
The data wasn’t enough to keep the stock market afloat, so when crude oil prices rose back above $69 a barrel on news of U.S. refinery outages, many investors chose to take money off the table. High energy prices could translate to accelerating inflation, which investors fear the Fed may use as a reason to raise interest rates later in the year. The Fed is scheduled to meet Wednesday and Thursday.
“Without much of a catalyst right now, profit-taking from that big rise earlier this morning is what we’re seeing. The stock market doesn’t like uncertainty,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.
He added that Wall Street is growing concerned again about the troubles surrounding subprime lending, or lending to people with poor credit histories. Bear Stearns Cos. said last week that two of its hedge funds nearly collapsed after betting on complex securities backed by subprime mortgages; Bear Stearns’ stock fell more than 3 percent Monday.
The Dow Jones industrial average fell 8.21, or 0.06 percent, to 13,352.05, after rising more than 100 points earlier in the day, and falling 185 points Friday.
Broader stock indexes also fell. The Standard & Poor’s 500 index fell 4.82, or 0.32 percent, to 1,497.74, and the Nasdaq composite index lost 11.88, or 0.46 percent, to 2,577.08.
A decline in Treasury yields failed to calm the stock market Monday. The 10-year Treasury note’s yield fell to 5.09 percent from 5.14 percent late Friday, dampened by worries about mortgage-backed securities. If high-risk investments are souring, investors tend to buy up safe-haven Treasury issues.
Soaring yields have played a starring role in the stock market’s volatility this month, because higher rates can slow down corporate activity; the 10-year yield’s climb above 5 percent knocked the Dow from a record high reached June 4, and since then, stocks have been rising and falling fitfully as investors attempt to determine interest rates’ direction.