Stocks Pare Gains as Housing Stats Disappoint
The Dow got a little bump at the opening bell but fell off the cliff into a triple-digit decline after pending-home sales dropped more than expected.
Enthusiasm for the bailout of Fannie Mae and Freddie Mac had already started to deflate as investors worried that the rescue wouldn't solve the bigger problemswith the housing and credit markets. This report only served to highlight that.
Pending-home sales fell 3.2 percentin July from June, more than triple the 1-percent drop expected. Pending sales are based on signed contracts, which aren't counted as a sale until the transaction closes. Such sales are down 6.8 percent from a year ago.
In other economic news, wholesale inventories rose 1.4 percent in July, double of what economists had projected.
Homebuilders surrendered Monday's gains after the report and as Credit Suisse downgraded a group of industry leaders, citing concerns that prices will continue to fall and credit standards will remain tight. Several well-known names in the sector shed more than 5 percent, including Hovnanian and KB Home.
Shares of Fannie shot up more than 13 percent while Freddie tumbled after an initial pop.
Financials were some of the day's biggest decliners, following Monday's 4-percent rally.
Washington Mutual tumbled more than 20 percent as the cost to insure the bank's debt hit a record just a day after the ouster of its CEO. WaMu's credit-default swaps soared 31.5 percent, meaning it costs $3.15 million to insure $10 million in debt for five years, Markit Intraday reported.
Wachoviashares slipped after Merrill Lynch said the bank wouldn't get much boost from the rescue plan and downgraded it to underperform.
Lehman Brothers fell another 10 percent, bringing its two-day total to more than 20 percent, as the market buzzes about the company's plans to raise capitaland potential sale of its Neuberger Berman asset-management unit.
Citigroup is isselling three-year Samurai bonds valued at 315 billion yen ($2.93 billion) to Japanese retail investors, lead manager Nikko Citigroup said. The deal will be the largest Samurai bond issue ever.
Techs showed a little gusto after getting hammered in the past week.
Dow component Hewlett-Packard rose 3 percent after Bernstein upgraded its rating on the stock following HP's acquisition of Electronic Data Systems.
Microsoft also helped to prop up the Dow, while Sun Microsystems was among the biggest gainers on the Nasdaq.
Apple ticked higher amid anticipation of the company's new-product announcement today, widely believed to be the debut of new iPods.
Google slipped following news that the Justice Department has hired one of the nation's best-known litigators, the latest sign that it plans to launch an antitrust action against Google for its tightening grip on the online-advertising market.
The price of oil remained depressed, sliding more than $2 to around $104 a barrel as OPEC powerhouse Saudi Arabia suggested that a meeting of oil ministers of the 13-nation organization will decide to keep crude production steady, despite their worries over rapidly falling prices.
On the economic front, a measure of U.S. employment expectations fell to its lowest level since 2003, amid signs the job market slowdown is spreading to economies around the globe, a quarterly survey by Manpower showed.
And discount retailer 99 Cents Only Stores announced the first price increase in its 26-year history, blaming inflation and rising food and energy prices for its new 99.99-cent prices. Shares fell more than 1 percent premarket.
Asian stocks ended lower on growth worries while European markets started the day in the red but turned into the green in mid-morning.
WEDNESDAY: Weekly mortgage applications; crude inventories
THURSDAY: Import/export prices; international trade; weekly jobless claims; Treasury Budget
FRIDAY: Producer prices; government reading on retail sales; business inventories; consumer sentiment
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