Stock market waffles after big drop in home sales
NEW YORK (AP) — The stock market flicked between small gains and losses Friday after the government reported a plunge in new-home sales.
A boom in housing has supported this year’s rally in stocks. Now, the drop in sales has traders worried that the U.S. housing recovery could falter because of higher mortgage rates.
Stocks of major homebuilders such as PulteGroup and Lennar fell sharply after the Commerce Department said sales of new homes fell 13.4 percent in July. Average U.S. rates for fixed mortgages this week rose to the highest level in two years.
The Dow climbed as much as 29 points just after the market opened, then pulled back after the home sales report was released at 10 a.m. EDT (1400 GMT). By midday, it was up 10 points, or 0.1 percent, at 14,974.
Microsoft, which is in the Dow, surged as much as 8 percent after CEO Steve Ballmer said he will retire within the next 12 months. Ballmer took the helm of the software company from founder Bill Gates in 2000. The company is struggling to adapt as consumers switch from desktop computing to mobile devices.
Other stock indexes rose. The broader Standard and Poor’s 500 index edged up two points, or 0.1 percent, to 1,659.
The Nasdaq composite rose 10 points, or 0.3 percent, to 3,649. The Nasdaq stock exchange was closed for most of the afternoon Thursday due to a technical glitch.
Traders reacted to the drop in home sales by buying bonds and gold, investments that become more attractive when the economy appears weaker.
The yield on the 10-year Treasury note declined to 2.83 percent from 2.89 percent late Thursday. The price of gold rose $25, or 1.8 percent, to $1,395 an ounce, the highest in two months.
The stock market has sagged in August on concerns that the Federal Reserve will start to pull back on its economic stimulus. The Fed has been buying $85 billion in bonds a month to hold down long-term interest rates and boost lending.
The S&P 500 has fallen 3 percent from its record close of 1,709 on Aug. 2, but remains up 16 percent for the year. The Dow fell for six straight days through Wednesday, its longest losing streak of the year. It’s still up 14 percent for the year.
Many investors will see the summer slump as an opportunity to buy stocks at less expensive prices, said Joe Bell, a senior equity analyst at Schaeffer’s Investment Research.
“It’s getting more attention in the mainstream,” said Bell. “People are buying this pullback right now.”
Among other stocks making big moves:
— Microsoft rose $1.92, or 6 percent, to $34.30 after Ballmer’s retirement was announced.
— Pandora Media, the online music streaming company, slid $2.60, or 12 percent, to $19.14 after the company issued a disappointing profit outlook for the current quarter.
— Aeropostale slid $2.23, or 20 percent, to $8.75 after the teen retailer reported dismal quarterly results and a pessimistic outlook. Several other teen retailers including Abercrombie & Fitch and American Eagle Outfitters have also reported poor customer traffic and slumping sales.