Lumber futures prices fell sharply Wednesday on the Chicago Mercantile Exchange in reaction to a government report that housing starts had plunged more than 16% in December.
The Commerce Department reported that housing starts fell 16.2% in December, the steepest monthly decline in more than three years.
The lumber futures market, an indicator of expected demand for home building materials, responded in kind, with the contract for March delivery of lumber settling $3.40 lower at $178.70 per 1,000 board feet.
With the December drop, construction of new homes and apartments ended 1987 at an annual rate of 1.37 million units.
"Obviously, nobody liked the housing starts number," said Bud Merrill, an analyst in Eugene, Ore., for Shearson Lehman Bros. "It was significantly below our expectations and below the median estimate of 1.58 (million units)."
But Merrill said lumber futures also were pressured by lower cash prices stemming from slow demand linked to bad weather. He said that he expected futures prices to fall a bit more, then turn around as weather conditions improve.
Elsewhere, copper futures plummeted as much 8 cents a pound on New York's Commodity Exchange, despite analysts' contentions that the market's fundamental influences remain bullish. Tight supplies worldwide have recently boosted copper futures and cash prices in the United States and abroad. The decline in futures was followed by a sharp lowering in cash prices by some U.S. copper producers.
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