Stocks Close Near Lows, Led by Financials, Utilities
Stocks closed broadly lower at the end of a light-volume trading session as continued weakness in financial stocks brought down the major indexes.
The Dow Jones Industrial Average fell 56 points, closing near the lows of the trading session, while the S&P 500 and Nasdaq Composite ended with respective losses of 0.9% and 0.6%, respectively.
Existing home sales slipped 0.2% in July as inventories swelled 5.1% to a 9.6 month supply of home on the market. The July data reflects deteriorating selling conditions even before the credit crunch hit the markets in August.
"We might trade in a range here as the market digests the expense of the housing bust and the subprime crisis," said Brian Hicks, president of Wealth Daily, an investment newsletter. "The market was looking for a reason to correct, now it's looking for a reason to rally."
"This is just some bottoming action in housing," said Tim Hartzell, chief investment officer at Kanaly Trust. "It's going to take awhile to get its footing."
All 10 economic sectors tracked by S&P ended lower, with declines led by utilities and financial stocks. Bear Stearns shares fell more than $4, or 3.5%, as investors remained worried about global credit markets. Lehman Brothers also closed lower.
Shares of JP Morgan Chase fell almost 2% and was the second-worst performer among Dow 30 components.
Among utilities, shares of Exelon and American Electric Power ended down more than 3%.
Credit crunch concerns are also dampening market sentiment after Home Depot was forced to accept $1.8 billion less for its wholesale unit after private equity firms balked at the agreed price, several news outlets reported.
Concerns about the economy are also weighing on investors after a report indicated that the subprime loan crisis is now a greater risk to the economy than terrorism.
A survey by the National Association of Business Economists indicated there are some grave doubts about the health of the U.S. economy.
"The combined threat of subprime loan defaults and excessive indebtedness has supplanted terrorism and the Middle East as the biggest short-term threat to the U.S. economy," the NABE said.
In company news, shares of Gateway are soaring. Taiwan's Acer is buying Gateway for $710 million, or $1.90 a share, creating the world's number-3 PC maker.
Crocs gained after the apparel maker said it will launch a line of clothing using a form of the resin material it uses in its brightly colored clogs. The clothing line for men and children will hit stores in October as an attempt at diversification for the company as it tries to evolve from a niche shoe maker to a lifestyle brand.
Bayer and Onyx Pharmaceuticals have stopped a late clinical liver cancer trial of their Nexavar therapy in the Asia-Pacific region so patients can get the drug sooner after encouraging results. A review of the Phase III trial involving 226 patients found that Nexavar improved overall survival in patients with advanced hepatocellular carcinoma, the most common form of liver cancer.
U.S. Steel is buying Canadian-based Stelco for about $1.1 billion to strengthen its position as a supplier of flat-rolled steel products in North America.