U.S. Stocks Extend Drop After New-Home Sales Fall to Record Low
A new Toll Brothers Inc. home is constructed in Raleigh, North Carolina. Photographer: Jim R. Bounds/Bloomberg
U.S. stocks fell, with the Standard & Poor’s 500 Index dropping for a third day, after new-home sales sinking to a record low spurred concern about the durability of the economic recovery ahead of the Federal Reserve’s announcement about interest rates.
Caterpillar Inc., Microsoft Corp. and DuPont Co. fell more than 1.8 percent to lead losses in the Dow Jones Industrial Average. Adobe Systems Inc. dropped 5.3 percent after forecasting revenue that may miss the average analyst estimate. Freeport-McMoRan Copper & Gold Inc. slumped 3.2 percent as copper and gold declined.
“Housing numbers are ugly with a capital ‘U’,” said Michael Mullaney, who manages $9 billion at Fiduciary Trust Co. in Boston. “It looks like we’re going to double dip in housing. Investors are concerned.”
The S&P 500 declined 0.4 percent to 1,090.84 as of 10:55 a.m. in New York, extending this week’s slump to 2.7 percent. The Dow retreated 9.59 points, or 0.1 percent, to 10,283.93. Three stocks fell for every two that rose on U.S. exchanges.
Purchases of new homes in the U.S. fell in May to a record low as a tax credit expired, showing the market remains dependent on government support. Sales collapsed a record 33 percent to an annual pace of 300,000 last month from April, less than the median estimate of economists surveyed by Bloomberg News and the fewest in data going back to 1963, figures from the Commerce Department showed today in Washington. Demand in prior months was revised down.
‘Tremendous Concern’
U.S. stocks sank yesterday as existing-home sales unexpectedly dropped and the S&P 500 slipped for a second day below chart levels monitored by analysts. The benchmark for U.S. equities has gained 3.6 percent since June 7 and completed its biggest two-week rally since November on June 18 as concern about Europe’s debt crisis eased.
“There’s a tremendous amount of concern about the housing market,” said David Lutz, managing director of equity trading at Stifel Nicolaus & Co. in Baltimore. “Today is FOMC day and it should be a non-event, given the recent jitters in the global markets and the weaker housing data coming through.”
The Federal Open Market Committee ends a two-day meeting and releases a policy statement today. Policy makers will hold the benchmark rate at the record-low range of zero to 0.25 percent today, a Bloomberg survey of economists showed.
A gauge of raw-materials producers fell 1.4 percent as metals prices slumped on concern of slower demand.
Freeport, the largest publicly-traded copper producer, tumbled 3.2 percent to $63.08.
Adobe
Adobe Systems Inc. had the biggest decline in the S&P 500, falling 5.3 percent to $31.03. The biggest maker of graphic- design programs forecast third-quarter revenue will be $950 million to $1 billion. Analysts on average estimated $962 million in sales.
Jabil Circuit Inc. had the biggest gain in the S&P 500, rising 9 percent to $14.81. The St. Petersburg, Florida-based electronics manufacturer reported third-quarter profit excluding some items of 40 cents a share, beating the average analyst estimate of 34 cents a share in a Bloomberg survey.
Philip Morris International Inc. surged 2.9 percent to $46.27. The world’s largest publicly traded tobacco maker forecast 2010 earnings per share will rise as much as 17 percent as improving markets and price increases offset the declining euro. EPS should be within a range of $3.70 to $3.80, Chief Executive Officer Louis Camilleri said today in a conference to investors in Lausanne, Switzerland.
“Nobody said the recovery was going to be robust,” said James Dunigan, chief investment officer at PNC Wealth Management in Philadelphia, which oversees $104 billion. “However, businesses are doing well, valuations are in pretty good shape. There are some pretty good values out there.”
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net.
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