Investors unsettled by housing report
NEW YORK » Wall Street gave up a huge advance and closed mixed yesterday after an unimpressive snapshot of the housing market unsettled investors. The Dow Jones industrials, which surpassed 13,400 early in the session, slipped back but still eked out a record close.
Investors who initially bought enthusiastically following a tame reading on inflation decided to cash in some of their gains after the National Association of Homebuilders said its housing index dropped to 30 from 33 in April, indicating a deteriorating housing outlook.
The stock market followed a months-long pattern of rising on upbeat economic data only to give back gains on the latest report of a decline in housing. The day's movement also followed the 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 trading, breezing past 13,400 after the inflation data raised hopes that the Federal Reserve might cut interest rates later this year. The U.S. Labor Department said prices paid by consumers rose less than expected in April, and indicated that inflation may be easing as the economy continues to cool. The consumer price index rose 0.4 percent after rising 0.6 percent in March, while core prices -- which exclude food and energy -- rose 0.2 percent after a 0.1 percent gain.
The Dow rose 37.06, or 0.28 percent, to 13,383.84, after rising to a new trading high of 13,481.60. The modest climb nudged the blue-chip index to its 22nd record close this year.
The Russell 2000 index of smaller companies fell 8.15, or 0.99 percent, to 814.18.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 1.64 billion shares, up from 1.39 billion Monday.
Broader indexes slipped. The Standard & Poor's 500 index fell 1.96, or 0.13 percent, at 1,501.19.
The technology-dominated Nasdaq composite index fell 21.15, or 0.83 percent, to 2,525.29.
Bond prices finished lower after the mixed data. The yield on the benchmark 10-year Treasury note rose to 4.71 percent from 4.69 percent late Monday. The dollar fell against other major currencies, while gold prices advanced.
A barrel of light sweet crude rose 71 cents to $63.17 on the New York Mercantile Exchange.
Investors were mostly undeterred by disappointing first-quarter results from Dow components Home Depot Inc. and Wal-Mart Stores Inc.
Home Depot, the nation's largest home improvement chain, posted lower quarterly profit as a sluggish U.S. housing market dented sales. Wal-Mart Stores, the world's largest retailer, missed Wall Street projections and warned second-quarter results might be disappointing.
Shares of Wal-Mart fell 22 cents to $47.62, while Home Depot shed 71 cents to $38.30.