Weak housing data drag equities down
US stocks slumped, with the Dow and S&P 500 on track for a fourth day of declines as an unexpectedly large drop in home sales ratcheted up concerns about the economic recovery.
Sales of US existing homes in July plummeted 27 percent to their slowest pace in 15 years, an industry group reported. The drop was twice as steep as expected.
Home building and related stocks slipped but came off their lows after hitting technical support. The PHLX housing index fell 0.8 per cent to 89.8, clawing back from a three per cent drop after it encountered support near its July low, right above 87.
The housing sales was the latest data to suggest that the pace of recovery is going to be much less robust than anticipated, and investors fled the market in search of safer bets.
Prices of US Treasuries soared, sending two-year yields to another record low. On the S&P 500, defensive plays telecoms and utilities were the only sectors in positive territory.
“Clearly, today’s economic report was another in a long line of growing evidence that things are slowing for the economy,” said Michael Sheldon, chief market strategist at RDM Financial, Westport, Connecticut.
“Investors were prepared for a weak existing home sales report, but today’s numbers blew the cover off the ball in terms of how weak it actually was.”
Merger and acquisitions activity continued to play a role in the market, with news on takeover target 3PAR. Dell is preparing to sweeten its offer for 3PAR, a day after Hewlett-Packard bid $1.6bn (£1bn) for the data storage company.
Shares of 3PAR gained 2.6 per cent to $26.77, while Dell fell 3.5 per cent to $11.52. HP, a Dow component, slid 1.3 percent to $38.52.
Medical device maker Medtronic plunged 10.6 per cent to $31.29 after it reported first-quarter revenue fell from the prior year and cut its outlook.
The Dow Jones industrial average fell 133.96 points, or 1.32 per cent, to 10,040.45 – its lowest level in seven weeks. The Standard & Poor’s 500 Index shed 15.49 points, or 1.45 per cent, to 1,051.87. The Nasdaq Composite Index lost 35.87 points, or 1.66 per cent, to 2,123.76.