Dow now at 10,836, down 52 points.
NEW YORK (AP) — Stocks fell from their 2010 highs Wednesday on
renewed concerns about European debt problems and weakness in the
housing market.
The Dow Jones industrial average fell about 45 points in afternoon
trading. Broader stock indexes also slid.
Treasury prices tumbled after a government debt auction drew only
modest demand for a second straight day. That stirred concern that
the government will have to pay more to attract buyers for its
debt. Washington has been issuing record amounts of debt to help
revive the economy.
The drop in stocks comes after Fitch Ratings lowered Portugal’s
credit rating. The rating agency said the country’s recovery will
be slower than other countries that use the euro. Fitch contends
that could hurt Portugal’s ability to repay its debt.
Debt problems in Europe have been one of the few drags on stocks in
recent months. Rising debt in Greece, Portugal and other nations
that use the euro have investors worried the countries will
struggle to rebound economically and upend a global recovery.
The dollar rose sharply against the euro and other major
currencies. The dollar is at its highest level against the euro
since May. The stronger dollar makes commodities more expensive to
foreign buyers. That cuts into demand.
Stocks have been carving steady gains for more than a month as
economic reports signal slow improvement in the economy. That has
kept cautious traders from placing big bets on a rebound. Some
analysts were already expecting a retreat now that major stock
indexes are at their highest level in about 18 months.
Subodh Kumar, global investment strategist at Subodh Kumar & Assoc.
in Toronto, said investors have been too quick to look past risks
still facing the economy such as debt problems in Portugal.
“There are quantitative issues that the markets have been
ignoring,” he said. “I believe that markets are somewhat
extended.”
In early afternoon trading, the Dow fell 44.44, or 0.4 percent, to
10,844.39, a day after closing at its highest level since September
2008.
The Standard & Poor’s 500 index dropped 5.28, or 0.5 percent, to
1,168.89, while the Nasdaq composite index fell 14.34, or 0.6
percent, to 2,400.90.
Bond prices dropped after an auction of $42 billion in five-year
Treasury notes drew weak demand. The yield on the five-year note,
which moves opposite price, rose to 2.59 percent from 2.43
percent.
The yield on the benchmark 10-year note rose to 3.84 percent from
3.69 percent late Tuesday.
An auction Tuesday of $44 billion in two-year notes also saw a
tepid response from investors.
A Commerce Department report on new home sales showed the market is
continuing to contract. Sales unexpectedly fell to the lowest level
on record in February as bad winter weather kept buyers out of the
market.
New home sales fell 2.2 percent last month to a seasonally adjusted
annual sales pace of 308,000. Economists polled by Thomson Reuters
had forecast sales would rise to 320,000.
The report comes a day after the National Association of Realtors
said a drop in sales of existing homes wasn’t as bad as forecast
last month.
A recovery in housing has been uneven. Reports that beat even
modest expectations have regularly been met with buying on Wall
Street, such as Tuesday’s big gains. The Dow jumped nearly 103
points, or 1 percent. It has advanced in 10 of the past 11
days.
Investors brushed off a report on orders to factories for
big-ticket manufactured goods that showed continued growth. Unlike
the housing market, the manufacturing industry has shown steady
improvement in recent months.
Durable goods orders — items expected to last at least three years
— rose 0.5 percent last month, slightly below expectations for 0.7
percent growth. However, it was the third straight month orders
rose, and excluding the volatile transportation sector, orders
increased by more than expected.
Orders climbed 0.9 percent in February excluding aircraft and other
transportation orders. Economists had forecast an increase of 0.6
percent.
In corporate news, General Mills Inc. said its fiscal third-quarter
profit jumped 15 percent and topped forecasts. The maker of
Cheerios and Yoplait yogurt also raised its earnings outlook for
2010, though it still falls short of analysts’ expectations.
General Mills shares fell $1.07 to $72.50.
Homebuilder Lennar Corp. said its fiscal first-quarter loss
narrowed. However, the company said it is on track to return to
profitability this year, which sent its shares higher. It climbed
98 cents, or 5.7 percent, to $18.04.
MF Global Holdings Ltd. shares surged after it named former New
Jersey Governor and Goldman Sachs executive Jon Corzine as its CEO.
It jumped 77 cents, or 10.5 percent, to $8.09.
Three stocks fell for every two that rose on the New York Stock
Exchange, where volume came to 488 million shares, compared with
471.6 million shares traded at the same point Tuesday.
Gold fell.
Crude oil fell $1.15 to $80.76 per barrel on the New York
Mercantile Exchange.
The Russell 2000 index of smaller companies fell 2.73, or 0.4
percent, to 687.57.
Overseas, European indexes bounced off lows initially seen after
the Portugal debt downgrade. Britain’s FTSE 100 rose 0.1 percent,
Germany’s DAX index rose 0.4 percent, and France’s CAC-40 fell 0.1
percent. Japan’s Nikkei stock average rose 0.4 percent.
