Dow advance is torpedoed by housing
Worries about the housing sector again tripped Wall Street on Wednesday, turning what might have been a second straight advance into a mild downer.
Now market bulls are looking to Friday’s report on February employment trends for comfort. A strong gain in jobs could damp fears that the economy could fall into recession this year.
Stocks were enjoying a modest rally Wednesday until the chief executive of home builder D.R. Horton used the “s” word.
Donald Tomnitz told investors at a conference in New York that “2007 is going to suck, all 12 months of the calendar year.”
As soon as his comments hit the newswires at 3:37 p.m. EST, the Dow Jones industrial average stumbled, giving up the last of the session’s gains.
The Dow finished down 15.14 points, or 0.1%, at 12,192.45. The blue-chip index had been up as much as 49 points, building on Tuesday’s 157-point surge.
“You’ve got to be careful what you say when people are listening,” joked Marc Pado, U.S. market strategist for brokerage Cantor Fitzgerald.
The broader market was mixed. The Standard & Poor’s 500 index slipped 3.44 points, or 0.2%, to 1,391.97.
The Nasdaq composite lost 10.50 points, or 0.4%, to 2,374.64.
Winners and losers were nearly even on the New York Stock Exchange.
Tomnitz’s comments sparked fresh concerns about the slowing housing market -- and how much worse the sales outlook might get.
Worry about rising defaults on mortgages made to people with bad credit records was one of the key catalysts of the stock market sell-off last week, which dragged the Dow down 4.2%.
Stocks were off modestly Monday, then resurged Tuesday. Market optimists had been hoping to see a carry-through of Tuesday’s rally Wednesday, and they got it -- until the last hour or so of trading, when sellers got the upper hand.
Still, Pado said he was impressed with how well stocks held up for most of the session.
“You would have thought we’d give more back” after Tuesday’s rebound, he said.
It could have been worse, analysts said, given another jump in oil prices. Near-term crude futures in New York rose $1.13 to $61.82 a barrel after gaining 62 cents Tuesday.
On the plus side, the Federal Reserve’s “beige book” report on the economy pointed to a “modest expansion” last month.
But a survey by private employment service ADP estimated that U.S. firms added a net 57,000 jobs in February, well below estimates. ADP’s estimates have sometimes been wide of the mark, however.
Pado said it was important for the government’s employment report Friday to show a healthy increase in jobs. Sustained weakness in job growth, he said, could spur deeper concern about a consumer-led economic downturn.
Many market pros doubt that stocks’ pullback ran its course in a mere five sessions, beginning with the Dow’s 416-point dive Feb. 27. That plunge put investors on edge, and more are likely to take some money off the table in the near term, some say.
“It doesn’t feel like this is done,” said Michael Vogelzang, chief investment officer of Boston Advisors. “I certainly don’t want to be a major buyer here.”
Among the day’s market highlights:
* Asian markets were mixed ahead of Wall Street’s session Wednesday. Japan’s Nikkei-225 index eased 0.5% after rebounding 1.2% on Tuesday. The dollar slipped to 116.36 yen from 116.67, reviving jitters about an unwinding of the “carry trade” -- global speculators’ use of low-cost Japanese loans to buy high-risk assets worldwide in recent years.
A stronger yen could push more of those speculators to sell whatever it was they bought.
* Energy stocks helped lift major indexes, as crude oil prices rallied. ExxonMobil gained 64 cents to $71.64, Valero Energy rose $1.96 to $59.80 and Marathon Oil was up $1.97 to $93.02.
* Boeing continued to buck the weakness in the broader market. The shares rose 89 cents to $88.71. Boeing has gained in four of the last six sessions. By contrast, the S&P; 500 has risen in only two of those sessions.
* Shares of many mortgage lenders rebounded for a second day. The stocks have been hammered in recent weeks on default fears. They also have been a favorite target of “short sellers,” traders who borrow stock and sell it, betting the price will drop.
The rally in the stocks Tuesday and Wednesday might have been powered by those same traders rushing to buy the shares to close out their bets.
IndyMac Bancorp jumped $1.52 to $31.18, Fremont General soared $1.75 to $8.53 and New Century Financial added 14 cents to $5.16.
* Deere surged $3.77 to $110.81. Brokerage Lehman Bros. upgraded the stock to “overweight” from “equal weight,” saying improved prices for crops could spur farm machinery sales.
* Treasury bond yields pulled back as buyers returned. The 10-year T-note ended at 4.49%, down from 4.53% on Tuesday.
* In the municipal bond market, California completed its sale of $4.4 billion of bonds backed by settlement payments from the cigarette industry. The deal in part refinanced so-called tobacco bonds issued in 2003, and raised $1.2 billion in funds for state infrastructure projects.
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