Stocks Pull Back on Housing Data

U.S. stocks closed lower Tuesday as disappointing data on U.S. housing starts in September overshadowed positive third-quarter earnings news from bellwethers Caterpillar (CAT) and Apple (AAPL).

September housing starts rose 0.5%, missing market forecasts and paving the way for profit taking as investors weighed current market levels against the outlook for the economy. Other data showed a 0.6% drop in September producer prices.

Further economic news will arrive Wednesday, when the Federal Reserve releases its Beige Book report on U.S. economic conditions.

On Tuesday, the 30-stock Dow Jones industrial average ended lower by 50.71 points, or 0.50%, at 10,041.48. The broad Standard & Poor's 500-stock index was down 6.85 points, or 0.62%, at 1,091.06. The tech-heavy Nasdaq composite index lost 12.85 points, or 0.59%, to 2,163.47.

On the New York Stock Exchange, 20 stocks were lower in price for every 11 that advanced. Breadth on the Nasdaq was 20-7 negative. basic materials, utilities, industrials sectors faltering.

The market was unable to extend its gains after a solid advance for U.S. stocks on Monday.

Treasuries and the dollar index rose. Gold and crude oil futures fell.

Chemical maker DuPont and health insurer UnitedHealth Group Inc. each cited cost-cutting efforts as they reported better results for the July-September period from a year earlier. Pfizer Inc., the world's biggest pharmaceutical company, also reported that lower expenses boosted its earnings.

Disappointing results from Bank of New York Mellon (BK) did little to sway the market. The financial company took a hefty charge during the third quarter to restructure its securities portfolio, resulting in a loss of almost $2.5 billion. Later Wednesday, Internet company Yahoo Inc. (YHOO) and student lender SLM Corp. (SLM) were scheduled to release earnings.

Better-than-expected earnings reports from Apple Inc. and Texas Instruments late Monday helped restore investor confidence that was shaken late last week by big banks' loan losses.

Earnings reports have bolstered hopes that the economy is indeed recovering. The market reached one-year highs Monday, with the Dow closing up 1%.

Global markets were also focused on U.S. earnings reports, hoping for signs of economic strength.

Japan's Nikkei stock average rose 1%. In afternoon trading, Britain's FTSE 100 was down 0.2%, Germany's DAX index edged lower by 0.06%, and France's CAC-40 index shed 0.05%.

Federal Reserve Board member Kevin Warsh said in a panel discussion Tuesday that the upmove in stocks was "remarkable" from March lows, though he wondered aloud if that was a signal of normalcy returning or a fresh bubble brewing. He was referring both to Asian and U.S. equities, says Action Economics.

In economic news Tuesday, producer prices fell 0.6% in September, a much larger drop than the 0.1% decline markets had expected, after a 1.7% gain the month before. The core rate, excluding food and fuel, edged down 0.1% in September after increasing 0.2% the month before. Energy prices fell 2.4%, partially offsetting the 8.0% jump in August. Crude goods fell 2.1%, while intermediate goods edged up 0.2%.

U.S. housing starts rose 0.5% to a 590,000-unit annual pace in September, weaker than the 609,000 expected by markets. Total starts fell 28.2% over last September. Moreover, August was revised down to 587,000 pace from 598,000. July was revised up to a 593,000 rate (previously 589,000). The drop in multi-family homes explained the weak reading. Multi-family starts fell 23.5% over August (down 69.3%, year-over-year). Single-family starts rose 3.9% over August, but were down 8.7% for the year.

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