Market Watch: US Stocks Fall As Housing Data Add To Gloom; DJIA Off 105
By Donna Kardos
NEW YORK (MarketWatch) — A record drop in U.S. home resales sent U.S. stocks broadly lower Tuesday as investors flocked to the safety of Treasurys on growing concerns about the future of the economy.
The Dow Jones Industrial Average was recently off 105 points, or 1%, to 10070, on track for its fourth-straight decline. Earlier, the measure briefly fell below 10000.
Investors followed a global move into safety, with a rally in the Treasury market pushing the yield on the 10-year note down to 2.54% after briefly touching its lowest point since March 2009. The dollar also lost ground against some other higher-yielding currencies, and investors moved into the yen in the rush to safety.
The moves came after data showed U.S. existing-home sales plunged a record 27.2% to their lowest level in 15 years in July as inventories soared. The report painted a grim picture for the housing market, absent government support in a stubbornly sluggish economy.
“It was no surprise it was going to be bad, but this was sort of a total disaster as far as the numbers were concerned,” said Tyler Vernon, principal and portfolio manager at Biltmore Capital Advisors. Vernon said his firm is increasing its prediction for the likelihood of a double-dip following the report.
“For 90% of Americans, their largest investment is their home and with the continued distress around housing, they’re continuing to feel less wealthy and to spend less,” Vernon added. “It gets us pretty nervous about what we’re going to start seeing when data comes out on consumer spending for right now.”
The Nasdaq Composite Index fell 1.3% to 2132 and the Standard & Poor’s 500-stock index slipped 1.2% to 1055.
Decliners outpaced gainers in NYSE Composite volume, with more than 80% of the volume to the downside. Still, the volume was thin, with just 2.4 billion shares having changed hands in NYSE Composite trading shortly before 1 p.m. Eastern. The 2010 daily average is 5.1 billion shares.
The dollar hit a fresh 15-year low against the yen as investors probed the determination of Japanese authorities to stem their currency’s advance. The euro also hit a nine-year low against the yen, and the Nikkei Stock Average sank to a 15-month low below 9000, into bear-market territory.
Stocks also fell in other overseas markets. The Stoxx Europe 600 index closed down 1.7% at 249.44. The U.K.’s FTSE 100 index fell 1.5% at 5155.95, France’s CAC-40 index ended down 1.7% at 3491.11 and Germany’s DAX fell 1.3% to 5935.44.
Crude-oil futures fell, while gold climbed after dipping in earlier trade.
The activity comes as investors have grown increasingly concerned about the global economy. Despite strong second-quarter earnings and a recent uptick in merger-and-acquisition activity, economic data have been disappointing.
The market is particularly jittery about the government’s second reading of second-quarter economic growth due Friday. That report is expected to show a slowdown in U.S. economic growth.
Investors are also apprehensive about the Federal Reserve’s annual meeting set for Friday and Saturday, after a Wall Street Journal report pointed to an ongoing discussion at the central bank over what to do next, if anything, about America’s weak recovery and low inflation.
“That’s got the market unnerved a bit,” said Quincy Krosby, chief market strategist at Prudential Financial. “You don’t want to hear that they’re unsure of how to pull us out of this.”
The health-care sector led the S&P 500’s drop, weighed down by a 11% tumble in Medtronic. The medical-device giant’s fiscal first-quarter revenue surprisingly fell and the company cut its earnings and sales forecasts for the year.
The materials sector was also weak as investors fretted about how demand for metals could be impacted by economic weakness. AK Steel slipped 3.7%, U.S. Steel declined 2.7% and Alcoa shed 2.5%.