Investors resume fretting over rates
NEW YORK » Wall Street had a renewed case of interest rate anxiety yesterday, with stocks falling on strong economic news and a jump in oil prices that heightened worries about inflation.
A 5.2 percent upswing in monthly sales of existing homes eased worries about a slowdown in the housing market but fed fears that the Federal Reserve will continue boosting interest rates to stave off price inflation. The Fed's Open Market Committee meets next week.
Investors also fretted about a Labor Department report that 302,000 workers applied for jobless benefits last week, down 11,000 from the week before and marking the first decline in a month. The implied job growth added to Wall Street's inflation and interest rate concerns.
The unemployment numbers "increase the probability the Fed will make its way back to 5 percent," said Robert Tipp, chief investment strategist for Prudential Fixed Income. The nation's benchmark interest rate currently stands at 4.5 percent.
The Dow Jones industrial average fell 47.14, or 0.42 percent, to 11,270.29. On Wednesday, the Dow added 81.96 to reach 11,317.43, its highest level since May 21, 2001.
Broader stock indicators also fell yesterday. The Standard & Poor's 500 index lost 3.37, or 0.26 percent, to 1,301.67, and the Nasdaq composite index dropped 3.2, or 0.14 percent, to 2,300.15.
Bonds slipped, with the yield on the 10-year Treasury note rising to 4.74 percent from 4.70 percent late Wednesday.
The National Association of Realtors said sales of existing homes totaled 6.9 million in February, even as mortgage rates recover from all-time lows. Economists were expecting 6.5 million homes sold.
Crude oil futures surged to near $64 per barrel on news that U.S. oil and gas reserves decreased last week. A barrel of light crude was quoted at $63.91, up $2.14, on the New York Mercantile Exchange -- 19 percent higher than a year ago.
"You've got good home sales figures showing some decent economic growth, and you've got crude oil prices up. You put those together, and that creates worries that the Fed is going to keep going on rates," said Stuart Freeman, chief equity strategist for A.G. Edwards & Sons.
However, it's also common for stocks to see modest losses after large gains. The major indexes were up for four straight days last week in addition to Wednesday's record session. Combined with the upcoming Fed meeting, a pause in the recent rally is to be expected, analysts said.