US stocks hit by biggest dip for two months
US stocks suffered their biggest fall in two months tonight, with the Dow Jones industrials logging a triple-digit decline as a disappointing bond auction and a lacklustre report on sales of existing homes halted the market’s two-day rally.
The market drifted lower for much of the session after the National Association of Realtors said sales of US existing homes fell 0.8% last month to a seasonally adjusted annual rate of 6.22 million.
Then, in the afternoon, a less-than-enthusiastic reception for the Treasury’s latest sale of five-year notes sent bond prices falling and yields rising sharply, rattling stock investors already worried about higher rates.
Stocks fell further while the yield on the 10-year Treasury note rose to a three-month high.
Earlier in the day, investors’ cheer over quarterly reports from eBay, Nokia and AT&T had failed to translate to gains as strong earnings news had done in previous days.
“We had a great run,” said Ryan Larson, senior equity trader at Voyager Asset Management, a division of RBC Dain Rauscher. “I think people are kind of tired right now and looking for other avenues.”
The Dow fell 119.21, or 0.94%, to 12,502.56.
Broader stock indicators also fell. The Standard & Poor’s 500 index fell 16.23, or 1.13%, at 1,423.90 and the Nasdaq composite index was down 32.04, or 1.30%, at 2,434.24.
The fall comes a day after the Nasdaq rose well over 1% and the Dow set record trading and closing highs. The Dow’s decline erased nearly all the previous two-day rally of about 145 points.
Bonds fell in response to the auction and the Realtors’ news, which also showed the inventory of existing homes available for sale fell 7.9% to 3.51 million. The yield on the benchmark 10-year note jumped to 4.87% from 4.81% last night. The dollar was mixed against other major currencies, while gold prices fell.
Investors have wondered for months whether the housing sector and the broader economy could share a similar fate; that is, if a fall in the housing market would drag down the rest of the economy.
Wall Street seemed to largely shrug off a Labour Department report that the number of Americans seeking unemployment benefits last week surged by the largest amount in 16 months, reversing two weeks of large declines.
Light, sweet crude fell 1.14 dollars to 54.23 dollars per barrel on the New York Mercantile Exchange. Investors halted recent sharp drops after growing more confident OPEC production cuts would occur.
In corporate news, eBay jumped 2.45 dollars, or 8.2%, to 32.45 dollars after the online auction house posted a 24% increase in profits as sales rose 29%.
Ford rose 2 cents to 8.22 dollars even as the car maker reported a loss for 2006 of 12.7 billion dollars – the worst in its 103-year history. Falling sales and enormous restructuring costs hurt results. Investors had been expecting a weak showing, however, and appeared relieved the report wasn’t worse.
AT&T rose 16 cents to 36.79 dollars after company’s fourth-quarter profit rose 17% amid growth in wireless subscribers and in its regional wireline businesses.
Nokia, the mobile phone maker, rose 90 cents, or 4%, to 21.11 dollars after the company’s fourth-quarter profit rose 19% as sales rose.
Lockheed Martin’s fourth-quarter earnings rose 28% as the defence contractor saw growth in areas like its military hardware business. The company, which raised its full-year profit forecast, rose 30 cents to 97.44 dollars.
Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.76 billion shares.
The Russell 2000 index of smaller companies was down 9.84, or 1.24%, at 784.19.
