Credit, oil fears dampen the Street
NEW YORK – Wall Street closed slightly lower in erratic trading Thursday as investors uneasy about the credit markets and record-high oil prices took little solace from reports on new home sales and durable goods orders.
The Commerce Department said sales of new homes rose 4.8 percent in September from August’s levels. The market initially popped on the data, as economists had predicted a decline. But it eventually pulled back because the sales increase was due to a big downward revision in August’s decline, and that homebuilders had offered discounts in September to move inventory.
“The sad part is, even with the discounts, we still have inventory overhang. And that’s a problem,” said Michael Strauss, chief economist at Commonfund. He noted that home prices are still falling, as are sales of existing homes, which make up the majority of the housing market.
Another report showed that orders of big-ticket items, one gauge of business spending, fell 1.7 percent in September, following August’s 5.3 percent drop. The economic data drew close attention by Wall Street as investors look for clues to determine if the Federal Reserve will lower rates at its meeting next week.
Meanwhile, investors also had to contend with higher energy prices – crude oil spiked to an all-time high of $90.60 a barrel before settling slightly lower – and credit worries continued to dog the market. Speculation that insurer American International Group Inc. might suffer credit costs weighed on the Dow Jones industrial average, which later rebounded from its lows.
The Dow fell 3.33, or 0.02 percent, to 13,671.92 after changing direction several times. The blue chip index was briefly down more than 100 points.
Broader stock indicators also fell. The Standard & Poor’s 500 index fell 1.48, or 0.10 percent, to 1,514.40, while the Nasdaq composite index fell 23.90, or 0.86 percent, to 2,750.86.
Investors appeared unsure both about the direction of the economy and whether the central bank will be compelled to lower interest rates again to boost spending. The central bank reduced rates last month by a half-percentage-point.
Many seem to believe the Fed will cut rates several times over the next six months to keep the economy moving forward, said Paul Nolte, director of investments at Hinsdale Associates. However, there does remain some doubt about the Fed’s economic plan.
In Asian trading, Japan’s Nikkei stock average fell 0.45 percent, but Hong Kong’s Hang Seng index rose 1.78 percent. In European trading, Britain’s FTSE 100 rose 1.45 percent, Germany’s DAX index rose 1.32 percent, and France’s CAC-40 rose 1.51 percent.