Stocks stumble after existing home sales plummet in July; Dow off 134
NEW YORK – Stocks fell for a fourth day after another disappointing report on housing deepened worries that the economic recovery could be fading. Bond yields fell as investors sought out more stable investments.
The Dow Jones industrial average lost 134 points Tuesday following news that sales of previously occupied homes fell last month to their lowest level in 15 years. The 27 percent drop in home sales from the previous month was the biggest since record-keeping began in 1968.
The Dow dipped briefly below 10,000 for the first time in seven weeks and has now lost 375 points since its four-day slump began. The yield on the two-year Treasury note reached another record low as cautious investors piled back into the bond market.
The National Association of Realtors said sales of previously occupied homes plunged in July to an annual rate of 3.83 million, much worse than the 4.7 million estimate from economists polled by Thomson Reuters.
Home sales have fallen sharply since a homebuyer tax credit expired at the end of April, despite mortgage rates reaching record lows. A stubbornly high unemployment rate of 9.5 percent has been keeping home sales down, and banks have also been cautious in making new loans.
"Without a boost in job creation, (buyers) just won't have the confidence to step in and buy a new home," David Katz, principal at Weiser Capital Management said.
Other world markets also fell. Japanese stocks led the way lower, falling more than 1 percent as the yen hit a fresh 15-year high against the dollar. Japan's economy relies heavily on exports, so a stronger yen hurts the profits of major Japanese companies.
Stocks have been sliding in recent days as investors focus on signs that economic growth is slowing. A new wave of corporate dealmaking gave stocks a temporary boost Monday, but those gains quickly faded.
The Dow fell 133.96, or 1.3 percent, to close at 10,040.45. The Standard & Poor's 500 index fell 15.49, or 1.5 percent, to 1,051.87, while the Nasdaq composite index fell 35.87, or 1.7 percent, to 2,123.76.
Three stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume was very light at 4.5 billion shares, up from an even lighter 3.3 billion shares the day before.
Japan's Nikkei stock average fell 1.3 percent after worries about the high yen hit share prices there.
In Europe, Britain's FTSE 100 fell 1.5 percent, Germany's DAX index dropped 1.3 percent, and France's CAC-40 fell 1.8 percent.
The yield on the 10-year Treasury note, which moves opposite to its price, fell to 2.50 percent from 2.60 percent late Monday. That yield helps set interest rates on mortgages and other consumer loans.
The 10-year note's yield continues to hover around levels not reached since March 2009, when the stock market hit a 12-year low and investors were concerned about the deepening recession. The yield on the two-year note went as low as 0.46 percent, another in a series of record lows.
Stock traders are "taking their cues from the bond market," said Lawrence Glazer, a managing partner at Mayflower Advisors. "It really has been a dramatic and frightening shift" in Treasury prices, which has spooked investors and led to worries about another recession, Glazer said.
Reports due out later in the week will also provide insight into the health of the economy. Data on new home sales, durable goods orders, weekly jobless claims and consumer sentiment are scheduled for later in the week.
The government will also release a revised report on second-quarter gross domestic product. The broadest measure of the country's total economic output is expected to be lower than initially thought, adding to concerns about the pace of the domestic recovery.