Closing Market Report
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Sluggish home sales pressure stocks down
By Tim Paradis
Associated Press
NEW YORK » Wall Street pulled back yesterday, losing momentum from last week's gains after news that sales of existing homes slipped in July for a fifth straight month stirred concerns about the strength of the economy.
Sales of existing homes slowed to their most sluggish pace in nearly five years, while home prices fell for a record 12th straight month. The National Association of Realtors reported that existing home sales slipped by 0.2 percent in July to a seasonally adjusted annual rate of 5.75 million units. Inventories rose 5.1 percent to a record 4.59 million units.
The stock market's pullback perhaps wasn't unexpected given last week's rally and that Wall Street is still trying to sort out concerns about failing mortgages and tighter access to credit for both individuals and corporations.
"I think there is still a little bit of nervousness about the credit market but that seems to be abating slowly," said Brian Gendreau, an investment strategist for ING Investment Management. "We had a very strong week last week and I wouldn't attribute this downmarket to any return to panic," he said, referring to concerns about bad loans and a drying up of liquidity that upset markets in recent weeks. "I think it's just a normal down day."
The Dow fell 56.74, or 0.42 percent, to 13,322.13.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 12.58, or 0.85 percent, to 1,466.79, and the Nasdaq composite index fell 15.44, or 0.60 percent, to 2,561.25.
The Russell 2000 index of smaller companies fell 9.48, or 1.19 percent, to 789.45.
Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where consolidated volume came to a light 2.35 billion shares compared with 2.56 billion shares traded Friday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude rose 88 cents to settle at $71.97 per barrel on the New York Mercantile Exchange.
Bond prices rose, with the yield on the benchmark 10-year Treasury note falling to 4.57 percent from 4.62 percent late Friday. Bond prices move opposite their yields.
Gendreau noted the Fed has "gone out of its way" to add liquidity, doing so again Monday with a $9.5 billion short-term injection into the banking system.
Investors faced such questions yesterday amid fresh signals that there still seems to be an appetite for corporate dealmaking. U.S. Steel Corp. said it would buy Canada's Stelco Inc. for about $1.1 billion; Swiss electrical engineer ABB Ltd. said it will sell its oil and gas production plant to Chicago Bridge & Iron NV for $950 million; and Taiwanese computer vendor Acer Inc. said it will acquire U.S. computer maker Gateway Inc. for $710 million.
Gateway surged 61 cents, or 50 percent, to $1.82 after the announcement.
Home Depot Inc. has tentatively agreed to sell its wholesale distribution business to private equity firms for $8.5 billion, a person with direct knowledge of the situation said Sunday, which is $1.8 billion less than originally planned. Home Depot shares rose 57 cents to $35.25 on the tentative deal.