Stocks Fall After Home Sales Data Shows Drop
Investors pulled away from stocks after an unexpected drop in home sales and a slide in oil prices fanned worries about the pace of the economy’s recovery.
Stocks fell for a second day Thursday after the National Association of Realtors said sales of existing homes dropped 2.7 percent in August after jumping 7.2 percent in July. Economists had expected sales would post their fifth straight monthly increase.
The market climbed in morning trading following a surprise drop in the number of people seeking unemployment benefits. The housing numbers upended that advance, however, and stocks never recovered. The Dow Jones industrial average ended with a loss of 41 points to bring its two-day drop to 122 points.
Financial stocks and home builders also lost ground after the housing numbers.
A stronger dollar weighed on the market by pushing commodity prices lower. That hit stocks of energy and materials companies.
Technology shares could see pressure Friday following disappointing quarterly results from BlackBerry maker Research In Motion Ltd. The company warned that revenue for the current quarter will fall short of analysts’ expectations. The stock fell 9 percent in after-market electronic trading.
Thursday’s retreat came a day after investors looked past a more upbeat assessment of the economy from the Federal Reserve and worried about what will happen once the government starts to wind down its economic stimulus efforts.
The Fed said on Wednesday it would slow its purchases of mortgage-backed securities to extend the program into early next year. A first-time home buyer’s credit is set to expire in November. Then, on Thursday, the Fed said it would reduce two emergency lending programs. One is for short-term loans to banks, while the other allows investment firms to temporarily swap risky securities for safe Treasurys.
“We know what the data looked like with the economy on life support,” said Stephen Wood, chief market strategist at Russell Investments. “What the market is beginning to price is what will the data look like when the Fed starts withdrawing that life support and that is not nearly as clear.”
Investors are also questioning how much farther the stock market can climb. The Standard & Poor’s 500 index has jumped 55.3 percent since hitting a 12-year low on March 9. Other indexes are also up sharply and the climb has come with few pauses. Many market watchers have been predicting a big drop in stocks and see unbroken gains as a sign of indiscriminate buying and a cause for worry.
The Dow fell 41.11, or 0.4 percent, to 9,707.44. The index fell Wednesday as investors worried about how quickly the Fed would rein in its supports for the economy. The Dow is now about 300 points away from the psychological benchmark of 10,000, a level it fell below nearly a year ago.
The S&P 500 index fell 10.09, or 1.0 percent, to 1,050.78, and the Nasdaq composite index fell 23.81, or 1.1 percent, to 2,107.61.
Three stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 5.6 billion shares and was flat with Wednesday.
“Basically, after the (Fed) meeting, investors took that as an excuse to take some profits,” said Carmine Grigoli, chief U.S. investment strategist at Mizuho Securities in New York.
The housing data and falling commodities overshadowed the Labor Department’s report that the number of newly laid off workers seeking unemployment benefits fell for a third week in a row. Initial claims for unemployment insurance fell by 21,000 last week to 530,000. Economists had been expecting an increase.
Commodities extended their losses from Wednesday as the dollar rose. The currency has weakened this year amid massive government stimulus programs and low interest rates, which has been a boon to commodities. Commodities are priced in U.S. dollars, and a weak greenback makes them more appealing to foreign buyers.
Oil dropped $3.08, or 4.4 percent, to settle at $65.89 a barrel on the New York Mercantile Exchange. That added to a nearly 4 percent slide the day before that came after the government said demand for energy was weak.
Gold ended below $1,000 for the first time in two weeks. Silver also posted a big drop.
Bond prices rose, pushing yields higher. The yield on the benchmark 10-year Treasury note fell to 3.38 percent from 3.43 percent late Wednesday.
The Russell 2000 index of smaller companies fell 11.62, or 1.9 percent, to 601.75.
Overseas, Britain’s FTSE 100 lost 1.2 percent, while Germany’s DAX and France’s CAC-40 both fell 1.7 percent. Japan’s Nikkei stock average rose 1.7 percent.
9/24/2009 7:35 PM SARA LEPRO, TIM PARADIS,AP Business Writers NEW YORK