Stock Pop From Home Sales Fizzles

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.

New-home sales rose 11 percentto 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 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 outlookfor the second time in two months.

Honeywell also fell after the diversified technology and manufacturing group hit its earnings target but lowered its full-year outlookto 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.

Dow component Verizon reported profit of 63 cents per share that also appeared to meet expectations.

Corning 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 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.

Meanwhile, Swedish telecom Ericssonagreed to buy Nortel's wireless unitfor $1.13 billion.

In other deal news, shares of Varian soared after Agilent Technologies agreed to buy the technology company for $1.5 billion, or $52 a share in cash.

RadioShack reported profit of 39 cents per share that beat analyst estimates.

Still to come: Biotech giant Amgen will report after the bell.

Fed chairman Ben Bernanke defended the Fed's actions in trying to end the financial crisis at a town hall meeting in Kansas City Sunday. It's part of an event to be aired this week on PBS.

Investors will keep an eye this week on events related to the health care reform bill, though it's likely now that any final action won't happen until after Congress returns from its August recess.

This Week:

MONDAY: $200 billion round of Treasury auctions begins; Earnings from Amgen after the bell
TUESDAY: Case-Shiller home-price index; consumer confidence; Earnings from US Steel, Viacom, Dreamworks and STMicro
WEDNESDAY: Weekly mortgage applications; durable goods; weekly crude inventories; Fed's beige book; Earnings from ConocoPhillips, Sprint Nextel, Time Warner, WellPoint Health, Visa
THURSDAY: Weekly jobless claims; Earnings from AstraZeneca, ExxonMobil, Colgate-Palmolive, Eastman Kodak, Kellogg, MasterCard, Motorola, Disney, MetLife
FRIDAY: GDP; Chicago PMI; Earnings from Chevron

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