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Stocks edge lower after Fed says Europe is a risk
Source: Agencies |
June 24, 2010, Thursday
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THE stock market closed with a slight loss yesterday after the Federal Reserve indicated that problems in Europe pose a threat to the U.S. economy and that it would keep interest rates low.
The Dow Jones industrial average rose about 5 points, but broader indexes fell and losing stocks outnumbered advancers on the New York Stock Exchange. Treasury prices rose, pushing down interest rates. The yield on the benchmark 10-year Treasury note fell to its lowest level in more than a year.
The Fed's economic statement issued after a meeting of its policymaking committee had no surprises. The central bank said that "financial conditions have become less supportive of economic growth." The Fed cited what it called "developments abroad" but didn't mention Europe by name.
Stocks have fallen from 2010 highs in April on worries that debt problems in Europe would spread and hurt a global rebound.
"The Fed is acknowledging what we're all seeing," said Mike Materasso, co-chair of the fixed income policy committee at Franklin Templeton. "There are problems in Europe, we've gotten a string of data in the U.S. with regard to employment, housing and even retail sales that is disappointing."
Stocks fell in morning trading after new home sales dropped by a third to a record low last month. The market traded essentially flat ahead of the Fed's afternoon statement.
The government's report that new homes sales fell to a seasonally adjusted annual pace of 300,000 was far weaker than expected. Economists polled by Thomson Reuters had forecast sales would drop nearly 19 percent to a seasonally adjusted annual rate of 410,000.
On Tuesday, an unexpected drop in sales of existing homes also hurt stocks. Existing homes are a far bigger part of the market than new homes. Traders were braced for more bad news yesterday.
The homebuyer's credit expired April 30, and its absence is expected to be felt beyond the May sales figures.
The housing report pushed traders into stocks of companies that sell consumer staples because they are considered safer in weak economies. Procter & Gamble Co., which makes Tide detergent and Gillette razors, rose 1.1 percent. Kraft Foods Inc. also rose. Fortune Brands Inc., which makes doors, bathroom faucets and other goods used in homes, fell 1.4 percent. Leggett & Platt, whose products include bedding and furniture parts, lost 1.2 percent.
"I think the market is, thankfully, already getting used to the idea that housing is going to fall off a cliff between the end of the homebuyer tax credit and now," said John Canally, economist at LPL Financial.
The Dow rose 4.92, or 0.1 percent, to 10,298.44. The Dow fell 149 points Tuesday after the report on home sales.
The broader Standard & Poor's 500 index fell 3.27, or 0.3 percent, to 1,092.04, and the Nasdaq composite index fell 7.57, or 0.3 percent, to 2,254.23.
The dollar fell against other major currencies.
Bond prices rose, driving down interest rates. The yield on the 10-year note fell to 3.11 percent from 3.17 percent late Tuesday. It was the lowest level since May 2009.
Procter & Gamble Co. rose 66 cents, or 1.1 percent, to US$61.38, while Kraft Foods Inc. rose 18 cents to US$29.54.
Fortune Brands fell 59 cents, or 1.4 percent, to US$42.99, and Leggett dropped 27 cents, or 1.2 percent, to US$21.71.
Homebuilder stocks mostly rose after a recent slide. PulteGroup Inc. rose 19 cents, or 2.1 percent, to US$9.05, while Toll Brothers Inc. rose 43 cents, or 2.5 percent, to US$17.49.
Falling stocks narrowly outpaced those that rose on the NYSE, where volume came to 1.1 billion shares, in line with Tuesday.
The Russell 2000 index of smaller companies fell 1.66, or 0.3 percent, to 644.25.
In Europe, Britain's FTSE 100 fell 1.3 percent, Germany's DAX index dropped 1 percent and France's CAC-40 fell 1.7 percent.
The Dow Jones industrial average rose about 5 points, but broader indexes fell and losing stocks outnumbered advancers on the New York Stock Exchange. Treasury prices rose, pushing down interest rates. The yield on the benchmark 10-year Treasury note fell to its lowest level in more than a year.
The Fed's economic statement issued after a meeting of its policymaking committee had no surprises. The central bank said that "financial conditions have become less supportive of economic growth." The Fed cited what it called "developments abroad" but didn't mention Europe by name.
Stocks have fallen from 2010 highs in April on worries that debt problems in Europe would spread and hurt a global rebound.
"The Fed is acknowledging what we're all seeing," said Mike Materasso, co-chair of the fixed income policy committee at Franklin Templeton. "There are problems in Europe, we've gotten a string of data in the U.S. with regard to employment, housing and even retail sales that is disappointing."
Stocks fell in morning trading after new home sales dropped by a third to a record low last month. The market traded essentially flat ahead of the Fed's afternoon statement.
The government's report that new homes sales fell to a seasonally adjusted annual pace of 300,000 was far weaker than expected. Economists polled by Thomson Reuters had forecast sales would drop nearly 19 percent to a seasonally adjusted annual rate of 410,000.
On Tuesday, an unexpected drop in sales of existing homes also hurt stocks. Existing homes are a far bigger part of the market than new homes. Traders were braced for more bad news yesterday.
The homebuyer's credit expired April 30, and its absence is expected to be felt beyond the May sales figures.
The housing report pushed traders into stocks of companies that sell consumer staples because they are considered safer in weak economies. Procter & Gamble Co., which makes Tide detergent and Gillette razors, rose 1.1 percent. Kraft Foods Inc. also rose. Fortune Brands Inc., which makes doors, bathroom faucets and other goods used in homes, fell 1.4 percent. Leggett & Platt, whose products include bedding and furniture parts, lost 1.2 percent.
"I think the market is, thankfully, already getting used to the idea that housing is going to fall off a cliff between the end of the homebuyer tax credit and now," said John Canally, economist at LPL Financial.
The Dow rose 4.92, or 0.1 percent, to 10,298.44. The Dow fell 149 points Tuesday after the report on home sales.
The broader Standard & Poor's 500 index fell 3.27, or 0.3 percent, to 1,092.04, and the Nasdaq composite index fell 7.57, or 0.3 percent, to 2,254.23.
The dollar fell against other major currencies.
Bond prices rose, driving down interest rates. The yield on the 10-year note fell to 3.11 percent from 3.17 percent late Tuesday. It was the lowest level since May 2009.
Procter & Gamble Co. rose 66 cents, or 1.1 percent, to US$61.38, while Kraft Foods Inc. rose 18 cents to US$29.54.
Fortune Brands fell 59 cents, or 1.4 percent, to US$42.99, and Leggett dropped 27 cents, or 1.2 percent, to US$21.71.
Homebuilder stocks mostly rose after a recent slide. PulteGroup Inc. rose 19 cents, or 2.1 percent, to US$9.05, while Toll Brothers Inc. rose 43 cents, or 2.5 percent, to US$17.49.
Falling stocks narrowly outpaced those that rose on the NYSE, where volume came to 1.1 billion shares, in line with Tuesday.
The Russell 2000 index of smaller companies fell 1.66, or 0.3 percent, to 644.25.
In Europe, Britain's FTSE 100 fell 1.3 percent, Germany's DAX index dropped 1 percent and France's CAC-40 fell 1.7 percent.
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