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CNBC ON DIGG

Stock Pop From Home Sales Fizzles

Published: Monday, 27 Jul 2009 | 10:28 AM ET

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By: CNBC.com

Stocks got a quick pop Monday after a sharp jump in new home sales, but quickly resumed their decline as lowered outlooks from Honeywell and Aetna cast a shadow over the market.

This comes after a strong run for stocks that brought the Dow its best two-week performance since 2000.

Major U.S. Indexes

.DJIA

.NCOMP

.SPX

New-home sales rose 11 percent to an annual rate of 384,000 in June, well above the 360,000 economists had expected. The number of new homes for sale fell to its lowest level since February 1998 and the median sale price for a new home dropped 5.8 percent from May to $206,200.

Aetna [AET Loading... () ] shares skidded after the health insurer reported its profit fell 28 percent amid higher medical expenses in its commercial business. Aetna also slashed its full-year outlook for the second time in two months.

Honeywell [HON Loading... () ] also fell after the diversified technology and manufacturing group hit its earnings target but lowered its full-year outlook to the low end of its previously-stated range.

It's a bit less busy on the earnings front this week, though still a full schedule: About 30 percent of the S&P 500 will report this week.

The CBOE Volatility index, widely considered the best gauge of fear in the market, is now below 25 after soaring to near 80 in the fall. Goldman Sachs derivatives strategists said they expect volatility to continue to decline as much of earnings season is now behind us.

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Dow component Verizon [VZ Loading... () ] reported profit of 63 cents per share that also appeared to meet expectations.

Corning [GLW Loading... () ] beat earnings expectations, citing strong demand for glass for flat-screen TVs, and said it expected that demand to continue for the rest of the year.

Corning "didn't give precise top- and bottom-line estimates for their business, but they raised their view of the overall LCD market, and I think that implies for Corning the second-half of the year should remains quite solid," Oppenheimer analyst Yair Reiner told Reuters.

Still, Corning shares fell more than 2 percent Monday after rising 10 percent in the past month.

Boeing shares [BA Loading... () ] fell after Barclays cut its rating on the aerospace giant to "equal weight" from "overweight," citing cost overruns on Boeing's 787 Dreamliner. Analyst Joseph Campbell said the aircraft has the potential to be Boeing's most profitable ever but delays in production of the aircraft are creating too much uncertainty. He also slashed his price target on the stock to $46 from $60.