Dow now at 10,303, up 10 points.
NEW YORK (AP) — Stocks mostly fell Wednesday after new home
sales dropped by a third to a record low last month following the
end of homebuyer tax credits.
The Dow Jones industrial average rose about 14 points in afternoon
trading while broader indexes fell. Treasury prices rose, pushing
down interest rates. The yield on the benchmark 10-year Treasury
note fell to its lowest level in more than a year.
Trading volume was light, as it has been all week. Part of the slow
morning trading came as traders watched World Cup matches. Yelling
erupted on the floor of the New York Stock Exchange when the U.S.
beat Algeria.
The government’s report that new homes sales fell to a seasonally
adjusted annual pace of 300,000 was far weaker than expected.
Economists polled by Thomson Reuters had forecast sales would drop
nearly 19 percent to a seasonally adjusted annual rate of
410,000.
On Tuesday, an unexpected drop in sales of existing homes also hurt
stocks. Existing homes are a far bigger part of the market than new
homes. Traders were braced for more bad news Wednesday.
The homebuyer’s credit expired April 30, and its absence is
expected to be felt beyond the May sales figures.
“I think the market is, thankfully, already getting used to the
idea that housing is going to fall off a cliff between the end of
the homebuyer tax credit and now,” said John Canally, economist at
LPL Financial.
The housing report pushed traders into stocks of companies that
sell consumer staples because they are considered safer in weak
economies. Procter & Gamble Co., which makes Tide detergent and
Gillette razors, edged higher. Kraft Foods Inc. also rose. Fortune
Brands Inc., which makes doors, bathroom faucets and other goods
used in homes, fell 2 percent. Leggett & Platt, whose products
include bedding and furniture parts, fell 1.3 percent.
The quiet trading came as traders awaited the Federal Reserve’s
latest assessment of the economy. Investors will be looking for
clues on whether policymakers still expect a slow recovery. The
central bank is widely expected to keep interest rates steady
following its two-day meeting that wraps up Wednesday afternoon.
The statement that accompanies the Fed’s rate decision is due at
2:15 Eastern.
The Fed has said rates will remain low for the time being to help a
rebound. Any indications of growth would be a welcome sign for a
market that has been choppy and volatile in recent weeks. Low rates
also help the stock market because they give investors few
alternatives for big profits aside from stocks. A low federal funds
rate helps limit returns in the bond market.
High unemployment and weakness in housing are two of the main
reasons the Fed has been able to keep rates low. Uncertainty
surrounding a recovery in the jobs and housing markets have cast
doubt on the pace of the economic recovery. Major stock indicators
tumbled from late April to early June on worries that the recovery
would stall.
Shortly before the Fed decision, the Dow rose 14.21, or 0.1
percent, to 10,307.73. The Dow fell 149 points Tuesday after the
report on home sales.
The broader Standard & Poor’s 500 index fell 1.51, or 0.1 percent,
to 1,093.80, and the Nasdaq composite index fell 4.16, or 0.2
percent, to 2,257.64.
The dollar rose against other major currencies.
Bond prices rose after the housing report, driving down interest
rates. The yield on the 10-year note fell to 3.14 percent from 3.17
percent late Tuesday. It was the lowest level since May 2009.
Crude oil fell $2.08 to $75.77 per barrel on the New York
Mercantile Exchange.
Procter & Gamble Co. rose 23 cents to $60.95, while Kraft Foods
Inc. rose 13 cents to $29.49.
Fortune Brands fell 69 cents, or 1.6 percent, to $42.89, while
Leggett dropped 23 cents, or 1.1 percent, to $21.75.
Homebuilder stocks mostly rose after a recent slide. PulteGroup
Inc. rose 27 cents, or 3.1 percent, to $9.13, while Toll Brothers
Inc. rose 43 cents, or 2.5 percent, to $17.49.
Falling stocks narrowly outpaced those that fell on the New York
Stock Exchange, where volume came to 546 million shares, compared
with 536 million shares traded at the same point Tuesday.
The Russell 2000 index of smaller companies rose 1.64, or 0.3
percent, to 647.55.
Britain’s FTSE 100 fell 1.3 percent, Germany’s DAX index dropped 1
percent and France’s CAC-40 fell 1.7 percent. Japan’s Nikkei 225
stock index fell 1.9 percent.
