Sluggish home sales weigh on Wall Street
NEW YORK » Wall Street managed a razor-thin gain yesterday as investors sifted through data that pointed to stable interest rates but also suggested the economy has moderated more than expected.
The market was down for much of the day after reports of sluggish home sales and durable goods orders, but stocks then turned higher at mid-afternoon. Investors have been struggling to rebound after losses this week on concerns the Federal Reserve's campaign of rate hikes has hurt the economy and that a soft landing might be harder to achieve.
The data bolstered views the Fed will 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, a U.S. economist with the 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 percent in July, the biggest drop since February. The report came one day after the National Association of Realtors reported sales of previously owned homes had a bigger than expected decline, prompting a market selloff.
Meanwhile, the department said orders to U.S. factories for big-ticket manufactured goods fell 2.4 percent in July as demand for aircraft and automobiles weakened. And the Labor Department said the number of Americans filing claims for unemployment benefits last week slipped by 1,000 to 313,000.
The Dow Jones industrial average picked up 6.56, or 0.06 percent, to 11,304.46.
Broader stock indicators were narrowly higher. The Standard & Poor's 500 index added 3.07, or 0.24 percent, to 1,296.06, and the Nasdaq composite index rose 2.45, or 0.11 percent, to 2,137.11.
One portfolio manager said the stock market's earlier drop 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 the 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. As we approach the fall, people will come back to work and the volume will pick up."