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Stock market falls as home construction slows
Source: Agencies |
November 19, 2009, Thursday
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STOCKS drifted lower yesterday after an unexpected drop in home construction and disappointing forecasts from technology companies added to worries about the U.S. economic recovery.
The modest drop came a day after major stock indicators closed at 13-month highs. The Dow Jones industrial average slipped 11 points after having risen over nine of the past 11 days. Analysts say the market has been due for a break after the fast ascent.
John Brady, senior vice president of global interest rate products at MF Global in Chicago, said as the end of the year approaches traders are looking foremost at preserving the gains amassed in an eight-month rally which has given the benchmark Standard & Poor's 500 index a gain of 22.9 percent so far in 2009.
"It's a bit of a consolidation trade," he said. "Traders are scared to go out too far out on a limb here and do anything too risky late in the year."
The day's economic news provided investors more reason for caution. The Commerce Department said construction of homes and apartments fell 10.6 percent in October to an annual rate of 529,000, well below the pace of 600,000 that economists polled by Thomson Reuters expected.
Joe Heider, president of Dawson Wealth Management in Cleveland, said the disappointing results "will push against what was a very bullish attitude on Wall Street."
Heider said investors were trying to determine whether the slowdown signaled weakness in the economy or a reluctance among builders to break ground when the future of a homebuyers' tax credit was uncertain. Lawmakers extended a tax credit for first-time homebuyers that was set to end this month through June.
Building permits, a key indication for future activity, slid 4 percent and fell short of forecasts.
Technology shares fell after BMO Capital Markets said Blackberry maker Research in Motion Ltd. faces increased competition as consumers opt for less expensive phones. Meanwhile, forecasts from software makers Autodesk Inc. and Salesforce.com fell short of analysts expectations.
The Dow fell 11.11, or 0.1 percent, to 10,426.31. The broader S&P 500 index slipped 0.52, or 0.1 percent, to 1,109.80, while the technology-heavy Nasdaq composite index fell 10.64, or 0.5 percent, to 2,193.14.
Trading volume was light, as it has been for weeks. That suggests a relatively small number of buyers, which means the market may have trouble holding on to a surge this month that has vaulted the Dow up 725 points, or 7.5 percent.
Investors are looking for any signals of further improvement in the economy to justify the gains that pulled major stock indexes off 12-year lows in March. Rising unemployment and tepid retail sales have some analysts worried that investors might have been too quick to place bets on a recovery.
The dollar mostly fell against other major currencies. That drove demand for gold and other metals.
Gold rose for a fourth straight day to a record US$1,151.20 an ounce before ending at US$1,141.20 an ounce on the New York Mercantile Exchange. Copper and silver touched their highest levels in more than a year.
The drop in the dollar offered only modest support to stocks. The market often moves opposite the dollar as weakness in the currency boosts demand for commodities. That, in turn, strengthens shares of energy and materials companies as well as exporters whose goods become cheaper to foreign buyers.
Matthew Eads, portfolio manager at Eads & Heald Investment Counsel in Atlanta, said the market is still at reasonable levels even though the S&P 500 index has risen 64 percent since March. But he cautions that stocks could pull back, however, if problems like unemployment don't ease or if confidence about a recovery falters.
"As long as people perceive fear or are losing their jobs, spending is going to go down," he said.
Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.37 percent from 3.33 percent late Tuesday.
Among tech stocks, Research in Motion fell US$1.55, or 2.5 percent, to US$59.85, while Autodesk slid US$2.80, or 10.4 percent, to US$24.20. Salesforce.com fell US$2, or 3.1 percent, to US$63.61.
Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 1.1 billion shares compared with 972 million Tuesday.
The Russell 2000 index of smaller companies fell 2.19, or 0.4 percent, to 600.15.
The modest drop came a day after major stock indicators closed at 13-month highs. The Dow Jones industrial average slipped 11 points after having risen over nine of the past 11 days. Analysts say the market has been due for a break after the fast ascent.
John Brady, senior vice president of global interest rate products at MF Global in Chicago, said as the end of the year approaches traders are looking foremost at preserving the gains amassed in an eight-month rally which has given the benchmark Standard & Poor's 500 index a gain of 22.9 percent so far in 2009.
"It's a bit of a consolidation trade," he said. "Traders are scared to go out too far out on a limb here and do anything too risky late in the year."
The day's economic news provided investors more reason for caution. The Commerce Department said construction of homes and apartments fell 10.6 percent in October to an annual rate of 529,000, well below the pace of 600,000 that economists polled by Thomson Reuters expected.
Joe Heider, president of Dawson Wealth Management in Cleveland, said the disappointing results "will push against what was a very bullish attitude on Wall Street."
Heider said investors were trying to determine whether the slowdown signaled weakness in the economy or a reluctance among builders to break ground when the future of a homebuyers' tax credit was uncertain. Lawmakers extended a tax credit for first-time homebuyers that was set to end this month through June.
Building permits, a key indication for future activity, slid 4 percent and fell short of forecasts.
Technology shares fell after BMO Capital Markets said Blackberry maker Research in Motion Ltd. faces increased competition as consumers opt for less expensive phones. Meanwhile, forecasts from software makers Autodesk Inc. and Salesforce.com fell short of analysts expectations.
The Dow fell 11.11, or 0.1 percent, to 10,426.31. The broader S&P 500 index slipped 0.52, or 0.1 percent, to 1,109.80, while the technology-heavy Nasdaq composite index fell 10.64, or 0.5 percent, to 2,193.14.
Trading volume was light, as it has been for weeks. That suggests a relatively small number of buyers, which means the market may have trouble holding on to a surge this month that has vaulted the Dow up 725 points, or 7.5 percent.
Investors are looking for any signals of further improvement in the economy to justify the gains that pulled major stock indexes off 12-year lows in March. Rising unemployment and tepid retail sales have some analysts worried that investors might have been too quick to place bets on a recovery.
The dollar mostly fell against other major currencies. That drove demand for gold and other metals.
Gold rose for a fourth straight day to a record US$1,151.20 an ounce before ending at US$1,141.20 an ounce on the New York Mercantile Exchange. Copper and silver touched their highest levels in more than a year.
The drop in the dollar offered only modest support to stocks. The market often moves opposite the dollar as weakness in the currency boosts demand for commodities. That, in turn, strengthens shares of energy and materials companies as well as exporters whose goods become cheaper to foreign buyers.
Matthew Eads, portfolio manager at Eads & Heald Investment Counsel in Atlanta, said the market is still at reasonable levels even though the S&P 500 index has risen 64 percent since March. But he cautions that stocks could pull back, however, if problems like unemployment don't ease or if confidence about a recovery falters.
"As long as people perceive fear or are losing their jobs, spending is going to go down," he said.
Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.37 percent from 3.33 percent late Tuesday.
Among tech stocks, Research in Motion fell US$1.55, or 2.5 percent, to US$59.85, while Autodesk slid US$2.80, or 10.4 percent, to US$24.20. Salesforce.com fell US$2, or 3.1 percent, to US$63.61.
Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 1.1 billion shares compared with 972 million Tuesday.
The Russell 2000 index of smaller companies fell 2.19, or 0.4 percent, to 600.15.
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