Stocks declined Wednesday, but were off earlier lows after a better-than-expected housing report.
New-home sales fell less than expectedin February, the Commerce Department reported. The pace of sales declined 1.8 percent to an annual rate of 590,000 from an upwardly revised pace of 601,000 in January. Economists had expected a more severe drop to a 580,000 rate, a Reuters survey showed.
Inventories of unsold homes fell 2.1 percent, an encouraging sign that buyers are starting to nibble. The median sales price was down from a year ago, but rose 8.2 from the prior month to $244,100.
A separate report showed mortgage applications soared last weekafter the Federal Reserve cut its fund rate by 75 basis points.
Stocks had taken a triple-digit tumble at the opening bell after a report showed new orders for big-ticket items unexpectedly declined.
Durable-goods orders fell 1.7 percent in February, after a revised decline of 4.7 percent in January, the Commerce Department reported. Economists had expected durable-goods orders to rise 0.8 percent, according to a Reuters survey. Nondefense capital goods orders excluding aircraft, a key gauge of capital spending, dropped 2.6 percent.
Meanwhile, Caterpillar Chairman and CEO Jim Owens said the U.S. economy is probably in a recession unlikely to recover until later in the year, during remarks in Tokyo. He expects the economy will probably grow by only 0.5 percent for all of 2008.
Still, there was some optimism in the market.
"There are some great growth areas in the S&P 500 still and investors should be looking there," Michael Church, senior portfolio manager of Church Capital Management, told CNBC.
David Bianco, chief equity strategist at UBS, went one further, saying his team expects to see 20 percent growth in the S&P 500 by year end.
"The S&P is not the same thing as US GDP and many of the cyclical companies and industries in the S&P 500 -– energy, industrials, technology, materials –- they’re very exposed to the global economy," Bianco told CNBC. There are likely to be a lot of "nonfinancial companies surprising on the upside in terms of their earnings performance -- in the middle of a U.S. recession," he added.
Major Wall Street investment banks said a day earlier that, indeed, there is money to be made among the wreckage. Executives from Goldman Sachs, Morgan Stanley and Lehman said it was time for bargain hunting.
Motorola said it would split into two separate, publicly traded firms, separating its money-losing handset division from the rest of its business.
Ford announced plans to sell its luxury brands Jaguar and Land Rover to India's Tata Motorsfor $2.3 billion. The sale is expected to close by the end of the next quarter.
More signs of distress in financials emerged, following a Wall Street Journal report that the $20 billion leveraged buyout of U.S. radio operator Clear Channel Communications is in jeopardy. Sources told Reuters the sticking point is that banks financing the deal are unwilling to take a mark-to-market loss.
Last week's rally failed to quell fears that the markets may have more to endure before a turnaround.
"I think you have to be careful about seeing big rallies and projecting it onto a longer-term trend line," Brian Battle, of Performance Trust Capital Partners, said this morning on "Squawk Box."
Asset writedowns and disruption to revenue stemming from the global credit turmoil could put Deutsche Bank's profit goal for this year at risk, the bank said in its annual report, sending its shares lower in Europe.
Also in financials, the saga of Bear Stearns looks set to continue as two U.S. pension funds have asked a Delaware court for an emergency order to delay JPMorgan from moving forward with its takeover plans. Meanwhile, more than 100 JPMorgan staffers moved into Bear Stearns' New York offices to begin the integration process. There is speculation that JPMorgan will lay off up to 50 percent of Bear's 14,000 employees.
AMR , parent of American Airlines, said it has voluntarily canceled nearly 10 percent of its flights Wednesday to check wiring in its MD-80 planes. The move, which affects 200 flights, is part of new FAA requirements following alleged inspection lapses at Southwest Airlines that resulted in a proposed $10.2 million fine.
WEDNESDAY: Oil inventories; Oracle earnings
THURSDAY: GDP; jobless claims; Lennar earnings; Fed auction
FRIDAY: Personal income and spending; consumer sentiment; KB Home earnings
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