Stocks turn lower after big advance
NEW YORK » Wall Street gave up a big advance and turned lower yesterday as investors suffered a renewed case of the jitters ahead of the Federal Reserve's meeting on interest rates later this week.
The stock market was initially relieved to hear from the National Association of Realtors that existing home sales declined in May by only 0.3 percent to 5.99 million units.
The tepid reading was expected, and indicated that the housing sector is still weak -- the pace of existing home sales was the slowest in four years; housing inventories rose by 5 percent to the highest level since 1992; and the median home price fell for a record 10th consecutive month.
"Without much of a catalyst right now, profit-taking from that big rise earlier this morning is what we're seeing. The stock market doesn't like uncertainty," said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.
He added that Wall Street is growing concerned again about the troubles surrounding subprime lending, or lending to people with poor credit histories. Bear Stearns Cos. said last week that two of its hedge funds nearly collapsed after betting on complex securities backed by subprime mortgages; Bear Stearns' stock fell more than 3 percent yesterday.
The Dow Jones industrial average fell 8.21, or 0.06 percent, to 13,352.05, after rising more than 100 points earlier in the day.
Broader stock indexes also declined. The Standard & Poor's 500 index fell 4.82, or 0.32 percent, to 1,497.74, and the Nasdaq composite index lost 11.88, or 0.46 percent, to 2,577.08.
The Russell 2000 index of smaller companies fell 7.29, or 0.87 percent, to 827.46.
Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.74 billion shares, down from 2.62 billion Friday.
A retreat in Treasury yields failed to calm the stock market yesterday. The 10-year Treasury note's yield fell to 5.08 percent from 5.14 percent late Friday, dampened by worries about mortgage-backed securities. If high-risk investments are souring, investors tend to buy up safe-haven Treasury issues.
The dollar rose against the euro and pound but fell against the yen. Gold prices fell.
Crude oil futures rose 4 cents to settle at $69.18 a barrel on the New York Mercantile Exchange, after falling to $68 a barrel and then rising after news of refinery outages.
Central bankers are widely expected to keep the benchmark rate steady at 5.25 percent Thursday, but Wall Street is unsure if the Fed will alter its stance on inflation, which could mean a rate hike or decrease later in the year.
Blackstone Group LP -- the private-equity powerhouse that went public on Friday -- fell $2.62, or 7.5 percent, to $32.44 in its second day of trading. Investors were concerned about valuation of the company, and also speculation that big buyout deals might begin to dry up.
In other corporate news, Rupert Murdoch was said to be near a pact to guarantee editorial independence of The Wall Street Journal if News Corp. acquires Dow Jones & Co., according to newspaper reports Sunday. Dow Jones fell $1.30, or 2.2 percent, to $57.70, while News Corp rose 18 cents to $23.50.