Wall Street retreats over economic data
NEW YORK » Wall Street retreated yesterday after housing data showed sales surged in April by the largest amount in 14 years, damping hopes that an interest rate cut would be needed to stimulate the economy.
Investors were originally enthusiastic after the U.S. Commerce Department reported sales of single-family homes rose 16.2 percent last month after falling slightly in March. Even though the report indicated that the economy continues to expand, investors became unnerved by a record drop in home prices.
With first-quarter corporate earnings reports mostly in, Wall Street is again placing increased significance on economic data. Reports yesterday suggested the Federal Reserve might be successfully steering the economy toward a soft landing and that a rate cut might not be needed.
"Sometimes good is bad," said Scott Fullman, director of investment strategy for Israel A. Englander & Co. "This takes away the anticipation that the Fed is going to ease interest rates because of the housing market."
He also said that after a months-long run, and before a three-day holiday weekend, that investors were taking a breather to collect profits.
The Dow Jones industrial average fell 84.52, or 0.62 percent, to 13,441.13. The shift in the direction of the Dow and the other major indexes yesterday was pronounced. The Dow rose nearly 100 points to 13,624.55 early in the session -- eclipsing its previous trading high of 13,609.75 reached Wednesday -- before pulling back.
Broader stock indicators fell. The Standard & Poor's 500 index fell 9.96, or 0.65 percent, to 1,512.32, and the Nasdaq composite index fell 30.09, or 1.17 percent, to 2,546.96.
Bond prices rose modestly after falling sharply early in the session with the release of the housing data. The yield on the benchmark 10-year Treasury note fell to 4.85 percent from 4.86 percent late Wednesday.
A barrel of light, sweet crude fell $1.44 to $64.33 on the New York Mercantile Exchange.
The dollar was higher against most other major currencies, while gold prices declined.
Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where volume came to 1.77 billion shares compared with 1.6 billion shares traded Wednesday.
The Russell 2000 index of smaller companies fell 12.74, or 1.52 percent, to 823.80.
The moves in stocks followed fresh economic data.
The housing report came after data released by the department earlier yesterday that showed sales of big-ticket manufactured goods posted a modest increase in April, perhaps signaling a continued rebound in business spending.
In addition to new home sales and durable goods, Wall Street received a weekly U.S. Labor Department report showing the number of newly laid off workers filing for unemployment benefits rose slightly last week -- but was still at a level reflective of a healthy labor market.
In corporate news, housing stocks were among the market's best performers as the Commerce Department data showed sales ramped up last month, albeit as prices fell. Even Toll Brothers Inc. -- which reported second-quarter profit fell sharply -- rose 30 cents to $30.07.