Stocks Pare Losses After Housing-Induced Slide
Stocks pared their losses Tuesday as homebuilder, telecom and some consumer stocks recovered after a sharp drop triggered by a dismal report on home sales.
The Dow Jones Industrial Average was down about 90 points, led by Boeing, Caterpillar and GE, after being down nearly 200 earlier.
If it holds, this would be the fourth straight decline for the Dow, which has lost 2.3 percent in the past three sessions.
The CBOE volatility index, widely considered the best gauge of fear in the market, popped above 27.
Existing-home sales fell 27.2 percentin July to an annual rate of 3.83 million units, their lowest pace in 15 years. The prior month was revised lower to show a 5.26 million-unit pace.
This came a day after Kansas City Fed President Thomas Hoenig said housing prices are likely to stay low for some timeand Moody’s Analytics chief economist Mark Zandi said the U.S. housing market is already in a double-dip recession.
David Rosenberg, chief economist at Gluskin Sheff, went even further, using the "D" word in reference to the entire economy — not just the housing sector.
"[W]e are finally exiting the denial stage and heading towards acceptance," Rosenberg said in a note to clients. "[T]his is a depression, and not just some garden-variety recession." He argues that the Obama administration's stimulus measures aren't working and when the U.S. moves away from them, then they "will likely have much more reason to turn optimistic."
Of course, doom is a two-sided coin: Nobel-prize winning economist Joseph Stiglitz said Europe is at risk for a double-dip recession because of all the austerity measures there, in an interview with a radio station in Ireland.
The market's decline had initially accelerated after the housing report but soon snapped back as some pockets of gains began to emerge, most notably, in housing stocks. DR Horton, Pulte and Beazer were among the biggest gainers in the sector.
Among other notable gainers were Verizon and AT&T, Walmart and Transocean.
Medtronic skidded after the medical-device maker reported its earnings rose but sales fell amid softness in the global health-care market.
On the M&A front, Dell may raise its $18-a-share bid for 3Par to match or exceed Hewlett-Packard's $24-a-share counter offer, according to reports.
Technology, along with financials and industrials, has been leading the market lower in its August slump.
Market pros are getting increasingly worried about tech as even sector darling Apple has struggled. Apple shares are down over 1 percent today and have underperformed in the past month.
Analyst Dennis Gartman, in his daily Gartman Letter, noted Tuesday that "since mid-June Apple has not only failed to make new highs, it has made lower highs and now lower lows. Having closed at $246 last evening, more than 10% below its all time high, the chart looks ominous."
The latest news on the Potash front is that Rio Tinto may bid for fertilizer maker, along with a Chinese partner. Potash is talking with other potential suitors in a bid to get a better price than the nearly $39 billion being offered by Australia's BHP Billiton.
Genzyme and Sanofi-Aventis are continuing discussions about a Sanofi takeover of Genzyme, though they still haven't agreed on a price, according to the Wall Street Journal.
Pfizer shares slipped after the company said its lung cancer treatment Sutent failed to meet its goal for longer overall survival in a late-stage trial.
And Borders Group's chief financial officer Mark Bierley resigned to take another job, shortly after the book retailer named a new chief executive officer.
TUESDAY: 2-year Treasury note auction; Earnings from Burger King
WEDNESDAY: MBA mortgage applications, advance report on durable sales, new home sales, weekly oil inventories, 5-year Treasury note auction; Earnings from BHP Billiton, Toll Brothers
THURSDAY: Weekly jobless claims, 7-year Treasury note auction.
FRIDAY: GDP, corporate profits, consumer sentiment; Earnings from Tiffany
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