Stocks Get a Lift From Data
Wall Street managed a razor-thin gain Thursday as investors sifted through data that pointed to stable interest rates but also suggested that the economy had moderated more than expected.
The market was down for much of the day after reports of sluggish home sales and durable-good orders, but stocks turned higher at mid-afternoon. Investors have been hoping for a rebound after losses this week amid concerns that the Federal Reserve’s campaign of rate hikes has hurt the economy and that a soft landing might be harder to achieve than previously thought.
The data bolstered views that the Fed would remain on the sidelines for the time being. However, slowing economic indicators also mean consumer spending is softening -- a key factor that drives the economy and corporate earnings.
“Looking beyond just the numbers, the trend is obviously toward slowing housing demand,” said Elisabeth Denison, an economist with securities firm Dresdner Kleinwort. “The Fed has been banking on this to help cap inflation as we go through the year, but it also calls into question that maybe things have gone too far.”
The Commerce Department reported sales of new homes fell 4.3% in July, the biggest drop since February. The report came one day after the National Assn. of Realtors reported sales of previously owned homes had a bigger-than-expected decline, prompting a market sell-off.
Meanwhile, the department said orders to U.S. factories for big-ticket manufactured goods fell 2.4% in July as demand for aircraft and automobiles weakened. And the Labor Department said the number of Americans filing initial claims for unemployment benefits last week slipped by 1,000 to 313,000.
The Dow Jones industrial average picked up 6.56 points, or 0.1%, to close at 11,304.46.
Broader stock indicators were narrowly higher. The Standard & Poor’s 500 index climbed 3.07 points, or 0.2%, to 1,296.06, and the Nasdaq composite index rose 2.45 points, or 0.1%, to 2,137.11.
Bonds were little-changed, with the yield on the benchmark 10-year Treasury note easing to a fresh four-month low of 4.8%, down from 4.81% on Wednesday.
Oil futures rose 60 cents to $72.36 a barrel in New York trading. Crude has been affected this week by continued uncertainty in the Middle East, but government data Wednesday showed rising supplies of gasoline as refiners increased output.
One portfolio manager said the stock market’s drop early in the session had more to do with light trading and a hair-trigger reaction by investors looking for direction.
“The summer is a seasonally weak time for the market, and we’re getting into the tail end of that,” said Art Nunes, portfolio manager of IMS Strategic Allocation Fund in Bellevue, Wash. “The markets are weaker today, but it’s more a case of the summer doldrums than any major factor.”
In other markets highlights:
* Retailers weighed on the market. Chico’s FAS plunged $6.13, or 25%, to $17.95 after the women’s apparel chain lowered its outlook for the third and fourth quarters. Dress Barn shed 58 cents to $17.83.
Williams-Sonoma dropped $2.71 to $29.89 after the houseware retailer slashed its outlook for the rest of the year because of disappointing sales at its Pottery Barn chain.
* European stocks rallied after a German business sentiment index for August remained unexpectedly buoyant, in a sign that the upswing in Europe’s largest economy might be built on stronger foundations than previously thought.
The Munich-based Ifo research institute said that its business climate index, based on a monthly survey of about 7,000 companies, fell less than economists expected, to 105 from 105.6 in July.
A separate report confirmed that Germany’s economy expanded by 0.9% in the second quarter, its best growth rate in more than five years.
Germany’s main stock index gained 0.7%. The French market rose 0.6%.
* Rite Aid agreed to buy U.S. drug stores from Canada’s Jean Coutu Group in a $2.6-billion cash and stock deal. Rite Aid slipped 32 cents, or 6.8%, to $4.36. The deal makes Rite Aid the largest drugstore operator on the East Coast.
* After hovering near 52-week lows, and being punished after Wednesday’s release of existing-home sales numbers, homebuilders staged a rebound. Pulte Homes rose $1.16, or 4.1%, to $29.25. Toll Brothers added 87 cents to $25.42 and Lennar gained 53 cents to $44.86.
* Ford Motor rose as high as $8.12 but closed flat at $7.76, in the wake of reports that the Ford family was considering taking the company private.
* Fannie Mae picked up $2.36, or 4.8%, to close at $51.53 after the government-sponsored mortgage giant said it no longer was threatened with criminal charges over its accounting.
* Exxon added $1.09, or 1.6%, to $70.72. Chevron rose $1.05 to $66.73. Anadarko Petroleum, an oil and natural-gas company, gained $1.55 to $46.50.
* EBay slid $1.22, or 4.5%, to $25.78 after Piper Jaffray cut the shares to “underperform.” Analyst Safa Rashtchy wrote that the company’s costs would probably rise and an increase in growth was “highly unlikely.”
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Bloomberg News was used in compiling this report.
