Closing Market Report
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Housing warnings push stocks down
By Tim Paradis
Associated Press
NEW YORK » Stocks fell for the second straight day yesterday after warnings from several homebuilders raised investors' concerns about an economic slowdown and comments about inflation from San Francisco Federal Reserve President Janet Yellen offered little comfort.
Wall Street has been trying to anticipate whether the Fed will keep interest rates stable -- or resume its rate hikes to keep inflation in check -- when it meets later this month.
Investors, already armed with recent economic data pointing to a housing slowdown, were forced to digest sour anecdotal evidence yesterday. Beazer Homes USA Inc., Hovnanian Enterprises Inc. and KB Home warned that the home-building sector is facing difficulties such as cancellations and spikes in inventories.
The bad news only worsened yesterday afternoon when news services quoted Yellen as saying the "the inflation outlook remains highly uncertain."
Yellen also said data suggest both the housing market and the overall economy are cooling; the question for investors is how quickly is that occurring.
"It seems to me that the market is trading lower on the fears that the economy is perhaps having a hard landing versus a soft landing," said Jim Herrick, head of equity trading at Robert W. Baird & Co. He contends the mounting news about a housing slowdown has spooked investors because of the major role the robust housing market played in driving economic growth in recent years.
The Dow Jones industrial average fell 74.76, or 0.66 percent, to 11,331.44.
Broader stock indicators also declined. The Nasdaq fell 12.55, or 0.58 percent, to 2,155.29 after posting its largest single-day point drop in more than a month on Wednesday, and the Standard & Poor's 500 index was off 6.24, or 0.48 percent, at 1,294.02.
Wall Street is wrestling with the question of how the Federal Reserve will act as it seeks to hold back inflation. Many investors, who would ordinarily cheer falling oil prices, remain focused on whether the Fed will resume its course of rate hikes when it meets Sept. 20 and whether such a move would put the brakes on an already slowing economy and perhaps dent corporate profits.
Oil prices declined after inventory figures showed rising refining capacity was helping add to U.S. gasoline and distillate inventories. Crude prices, which had recently been above $70 a barrel, had already fallen as tensions over Iran's nuclear ambitions eased and due to a lighter-than-expected hurricane season and news that a Gulf of Mexico platform is producing more than before it was struck by Hurricane Katrina.