Stocks mixed on housing
Pessimism from home builders dragged most U.S. stocks lower Tuesday, undoing a big rally earlier in the day. The Dow Jones industrials, which surpassed 13,400 in the session’s first hours, slipped back but still managed a record close.
Enthusiastic buying in the wake of a tame reading on inflation gave way to selling after the National Assn. of Homebuilders said its index of builder confidence dropped to 30 from 33 in April, indicating a deteriorating housing outlook.
The market followed its recent pattern of blue-chip stocks’ performing better than their smaller counterparts.
“We’ve got a real dichotomy going on here,” said Stephen Massocca, president of Pacific Growth Equities. “Big corporate America, the staid and stodgy companies, are doing well. They’re going up today. Stocks that are riskier, stocks that are smaller, stocks in the emerging market vein or technology vein, those are being sold.”
The Dow had surged more than 130 points by midday after the inflation data raised hopes that the Federal Reserve might cut interest rates this year. The Labor Department said prices paid by consumers rose less than expected in April, and indicated that inflation might be easing as the economy continued to cool. The consumer price index rose 0.4% after rising 0.6% in March, while core prices -- which exclude food and energy -- rose 0.2% after a 0.1% gain.
The Dow finished up 37.06 points, or 0.3%, to 13,383.84, after touching a new trading high of 13,481.60, the index’s 22nd record close this year.
Broader indexes slipped. The Standard & Poor’s 500 index fell 1.96 points, or 0.1%, to 1,501.19.
The Nasdaq composite index slid 21.15 points, or 0.8%, to 2,525.29.
The Russell 2000 index of smaller companies fell 8.15 points, or 1%, to 814.18.
Declining stocks outnumbered advancing issues by about 3 to 2 on the New York Stock Exchange.
Since the Dow broke through 12,000 for the first time in October, it has become almost routine for the blue-chip index to set new records. The overall market advance has also lifted the S&P; 500 near its record close of 1,527.46, reached in spring 2000. However, the Nasdaq remains well off its closing high of 5,048.62, also reached at the peak of the dot-com boom.
Bond yields moved little. Late in the day, the yield on the benchmark 10-year Treasury note was 4.70%, unchanged from late Monday.
The dollar resumed its slide against major currencies and fell close to a 29-year low against the Canadian dollar. Gold prices advanced.
Crude oil futures rose 71 cents to $63.17 a barrel on the New York Mercantile Exchange.
Investors were mostly undeterred by disappointing fiscal first-quarter results from Dow components Home Depot and Wal-Mart Stores. Both companies are considered to be barometers of consumer spending, and weaker sales were interpreted as another sign of a slowing economy that could also motivate the Fed to cut rates.
Home Depot, the nation’s largest home improvement chain, posted lower quarterly profit as the sluggish U.S. housing market dented sales. Sales at stores open at least a year slumped 7.6%.
Wal-Mart, the world’s largest retailer, fell short of Wall Street’s profit projections and warned that second-quarter results might be disappointing. Last week, it reported its weakest same-store sales for any April.
Shares of Wal-Mart fell 22 cents to $47.62, while Home Depot shed 71 cents, or 1.8%, to $38.30.
In other market highlights:
* Reuters Group shares rose $2.72, or 3.8%, to $74.34 after the company agreed to a $17.2-billion takeover by Thomson that would create the world’s largest provider of financial data and news, displacing Bloomberg from the No. 1 slot. Thomson rose 16 cents to $42.16.
* Woodland Hills-based 21st Century Insurance jumped 75 cents, or 3.6%, to $21.75. American International Group agreed to pay $22 a share for the publicly traded shares of 21st Century, raising its bid from the $19.75 a share offered in January.
* Shares of Thousand Oaks-based Amgen sank $2.06, or 3.7%, to $54.01, their lowest level in more than two years. Medicare on Monday proposed limiting coverage of Amgen’s anemia drugs. The stock is down 21% this year.
* Shares of Foothill Ranch-based nursing home operator Skilled Healthcare Group rose 40 cents, or 2.6%, to $15.90 on their first day of trading. The company went public at $15 a share Monday.
* Overseas, key indexes rose 0.2% in Britain, 0.6% in Germany, 0.4% in France and fell 0.9% in Japan.
