Blue chips end little changed despite woes
Stocks closed slightly lower in erratic trading Thursday as investors uneasy about the credit markets and record-high oil prices took little solace from reports on new-home sales and durable goods orders.
Share prices initially jumped after the Commerce Department said sales of new homes rose 4.8% in September from August -- instead of declining as many economists had predicted. But the market pulled back after investors realized the increase was caused by a big downward revision in August’s sales, and that September’s annual rate of sales was still lower than expected.
In addition, sales volume probably would have been worse if home builders hadn’t offered discounts in September to move their inventory.
Home prices are still falling, he said, as are sales of existing homes, which make up the majority of the housing market.
Another government report showed that orders for big-ticket items, a gauge of business spending, fell 1.7% in September after sliding 5.3% in August.
Oil prices weighed on stocks as crude futures touched an all-time trading high of $90.60 a barrel before closing above $90 for the first time. The near-term contract rose $3.36 to $90.46 a barrel on the New York Mercantile Exchange on reports of tight inventories.
Credit worries also continued to dog the market, especially financial stocks. Speculation that insurer American International Group might suffer mortgage-related losses helped depress the Dow Jones industrial average before it rebounded. The insurance giant’s shares fell $2.05, or 3.2%, to $61.79.
The Dow finished 3.33 points lower at 13,671.92 after crossing the break-even line several times. At one point the index was down more than 125 points.
The Standard & Poor’s 500 index fell 1.48 points, or 0.1%, to 1,514.40, while the Nasdaq composite index dropped 23.90 points, or 0.9%, to 2,750.86.
The Russell 2,000 index of smaller companies fell 4.74 points, or 0.6%, to 806.11.
Declining issues outnumbered advancers by 3 to 2 on the New York Stock Exchange.
Treasury yields ended higher. The yield on the benchmark 10-year note rose to 4.38% from 4.34% late Wednesday.
The dollar fell against other major currencies, nearing a record low against the euro and touching a 33-year low against Canada’s dollar. Gold rose.
Stocks might recover today after Microsoft late Wednesday posted better-than-expected profit and raised its earnings forecast. Its shares surged $3.57, or 11%, to $35.56 in extended trading after rising 2.4% during the regular session.
Investors appeared unsure Thursday about the direction of the economy and whether the Federal Reserve, which cut its key rate last month by half a point, will lower rates again when it meets next week. The central bank cut its key rate last month by a half-point.
Thursday’s housing report might not sway the Fed in either direction. David Seiders, the National Assn. of Home Builders’ chief economist, said some of the data in the government report might not give an accurate picture of the industry.
“All of the increase was recorded in the West region, which from other sources we know actually is very weak,” he said. “So I have a problem with the legitimacy of the reported increase.”
Mixed third-quarter earnings reports added to the uncertainty. Motorola and data storage specialist EMC showed decent growth, but Comcast and Symantec disappointed.
Motorola rose 75 cents, or 4%, to $19.30 after the cellphone maker managed to post its first quarterly profit this year and issued a fourth-quarter forecast that topped those made by analysts.
EMC said third-quarter profit surged 77% largely on growing sales of data storage software and hardware. EMC shares rose $1.92, or 8.5%, to $24.45.
Symantec issued a disappointing forecast. The security software maker’s shares tumbled $2.52, or 12%, to $18.50. Comcast sank $2.57, or 11%, to $21.28 after it missed expectations.
In other market highlights:
* Anaheim-based Pacific Sunwear jumped $1.29, or 8.4%, to $16.71 after saying it would put its unprofitable demo chain of teenage apparel shops up for sale and close its One Thousand Steps shoe and accessory stores. The stock is down 15% this year.
* Bristol-Myers Squibb rose 94 cents, or 3.3%, to $29.36 after the drug maker lifted its 2007 profit forecast in the wake of strong third-quarter sales of the blood thinner Plavix.
* Shares of WellCare Health Plans plunged $72.50, or 63%, to $42.67 after more than 200 federal and state agents, including members of Florida’s Medicaid fraud unit, searched the company’s offices. The drop wiped out about $3.1 billion in market value for WellCare, which operates Medicaid health plans for low-income Americans and Medicare plans for the elderly. The company said it was cooperating with the investigation, which it said was having no effect on its delivery of services.
* U.S.-traded shares of Sony jumped $2.69, or 5.9%, to $47.98 after its electronics sales rose 21% in the latest quarter.
* Overseas, key stock indexes rose 1.8% in Hong Kong, 1.5% in Britain, 1.3% in Germany and 1.5% in France. Share prices fell 0.5% in Japan.
