Stocks slip in early trading after a disappointing report on housing startsBy Stephen Bernard, AP
Wednesday, November 18, 2009
Stocks are modestly lower in early trading
NEW YORK — Stocks slid in early trading Wednesday after a report showed housing starts dropped unexpectedly in October.
Overseas, Asian markets declined while European markets were trading higher.
The Commerce Department said construction of new homes and apartments fell 10.6 percent in October to a seasonally adjusted annual rate of 529,000 units. Economists polled by Thomson Reuters forecast a pace of 600,000.
Joe Heider, president of Dawson Wealth Management in Cleveland, said the disappointing results “will push against what was a very bullish attitude on Wall Street.”
Heider said investors were trying to figure out if the results were due to homebuilders waiting to see if the government tax credit would be extended or if they were a sign of general weakness in the economy.
The tax credit for first-time homebuyers, which was set to expire at the end of the month, was recently extended through June.
The real estate sector was among the hardest hit in recent years, helping throw the country into recession. Investors are hoping to see continued improvement in sales and prices as they hunt for signs of recovery.
Building permits, a key indication for future activity, also declined, falling 4 percent to an annual rate of 552,000 units. Economists had forecast a rate of 580,000.
In early morning trading, the Dow Jones industrial average declined 27.51, or 0.3 percent, to 10,409.91. The Standard & Poor’s 500 index fell 1.72, or 0.2 percent, to 1,108.60, while the Nasdaq composite index declined 8.83, or 0.4 percent, to 2,194.95.
The disappointing housing data could be getting offset somewhat as the dollar resumed its slide. Heider said a decline in the dollar would provide some counterbalance to the housing report.
“Today, we’re going to have a mixed bag,” he said, adding stocks are likely to trade in a narrow range.
Stocks have often been moving in the opposite direction of the dollar in recent months as a weakening dollar boosts demand for commodities. That, in turn, strengthens shares of energy and materials companies.
An inflation report showed prices at the retail level remain fairly tame as rising unemployment, nervous consumers and tight credit keep prices stable.
The Labor Department said consumer prices rose 0.3 percent in October, slightly above the 0.2 percent economists expected. Core inflation, which excludes volatile energy and food prices, rose 0.2 percent, compared to analysts’ expectation for a 0.1 percent rise.
A report released Tuesday on prices at the wholesale level showed rapid inflation was not imminent, backing up comments from Federal Reserve Chairman Ben Bernanke earlier in the week.
The dollar mostly fell against other major currencies, while gold prices rose, touching a new record high. Gold rose $8.10 to $1,147.50 an ounce, after rising as high as $1,151.00 earlier in the day.
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