Stocks Fall on Mixed Economic Data
Nervous investors bid stocks lower Tuesday as conflicting economic data prompted them to pull money out of the market ahead of next week’s Federal Reserve decision on interest rates.
With Wall Street concerned about inflation and the Fed’s interest rate policy, the Commerce Department’s report showing a surprise jump in new-home sales last month assuaged fears that higher rates would curtail consumers’ willingness to buy homes. And oil prices also fell one day after reaching the $56 a barrel level, further easing fears that inflation might take hold.
But a drop in consumer confidence to its lowest level in five months worried investors, and many remained on the sidelines in the hopes that the Fed next week could provide clarity on the economy.
“In a way, this week is kind of a wash, because everyone is going to be holding their breath for the Fed,” said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisors in Boston. “But really, earnings are going in pretty strong and the economy is still growing and moving in the right direction, and stocks look pretty cheap right now.”
The Dow Jones industrial average fell 91.34 points, or 0.9%, to 10,151.13.
Broader stock indicators also moved lower. The Standard & Poor’s 500 index was down 10.36 points, or 0.9%, at 1,151.74, and the Nasdaq composite index lost 23.34 points, or 1.2%, to 1,927.44.
Declining issues outnumbered advancers by nearly 5 to 2 on the New York Stock Exchange.
Oil prices retreated for a second session, with a barrel of light crude settling at $54.20, down 37 cents, in New York trading.
The markets received some support from home builder stocks, which rose after the Commerce Department reported a surprising jump in new-home sales for March. New-home sales rose to an annualized rate of 1.43 million, up from 1.23 million in February. Wall Street was expecting sales to fall to 1.19 million.
The housing report was seen as evidence of a still-growing economy, and helped push bond yields higher. The 10-year note rose to 4.27%, from 4.25% on Monday. Bond yields rise as their prices fall.
The housing news also helped overcome a disappointing reading on consumer confidence, which Wall Street feared would result in lower consumer spending. The Conference Board’s consumer confidence index fell to 97.7 in April from 103 in March. The reading was slightly lower than the 98 economists expected.
“We’re in a very day-to-day, news-driven market,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “One day we’re worrying about inflation. The next day we’re worrying about slower growth. The next day it’s good earnings. In general, there’s more good news than bad news, but we’re paying more attention to the negative stuff for now.”
In other market highlights:
* Home builders getting a boost from the Commerce Department report included Centex, up $1.20 to $60, and Toll Bros., which picked up 82 cents to $76.18. Pulte Homes gained 56 cents to $71.81 and Hovnanian Enterprises rose 88 cents to $50.90.
“The fact that the housing market can continue to be strong is a vital statistic,” said Oscar Nelson, a trader at U.S. Global Investors Inc.
* DuPont, the No. 2 U.S. chemical manufacturer, lost $1.55 to $47.03. The 3.2% decline was the steepest in the Dow average. First-quarter profit was 96 cents a share, less than the average analyst estimate of $1.01 in a Thomson First Call poll.
* An S&P; 500 gauge of materials shares slumped 1.9% for the biggest drop among 10 industry groups amid concern that slowing economic growth may curb demand for raw materials.
U.S. Steel lost $1.91 to $44.51, erasing a 3.7% gain sparked by its better-than-expected earnings. The biggest U.S. steelmaker said domestic prices would fall this quarter and earnings would decline in Europe because of rising raw-material costs.
Rockwell Automation fell $8.38, or 15%, to $48. The world’s largest maker of factory controls had fiscal second-quarter profit excluding some items of 61 cents a share, 5 cents less than the average analyst estimate in a Thomson poll.
* Genentech jumped $3.12 to $72.55, a day after the South San Francisco-based biotechnology company said its Herceptin breast cancer medicine cut the risk of relapse among women newly diagnosed with an aggressive form of the disease.
* Computer chip maker Altera increased $1.35 to $20.60 on first-quarter net income of 17 cents a share. Analysts expected profit of 15 cents.
