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US stocks lose ground after sharp drop in new home sales stirs concerns about consumers

US stocks lose ground after sharp drop in new home sales stirs concerns about consumers

Stocks lost ground for a second day Friday, giving up an early rally after a government report of a steep decline in new home sales stirred concerns that weakness in housing will continue to dog the economy.
The Commerce Department report that new home sales fell 9 percent from October to a seasonally adjusted annual rate of 647,000 triggered renewed nervousness that consumers could become uneasy and tamp down their spending.
Stocks, which fell more than 1 percent Thursday following unwelcome economic readings and the assassination of Pakistani opposition leader Benazir Bhutto, began falling again by Friday afternoon.
The Chicago purchasing managers' index had for a time offered some support to investor sentiment Friday after it showed a stronger-than-expected increase for December manufacturing activity in the Midwest.
But Wall Street appeared unable to hold onto its enthusiasm. Investors are eager for any economic data that can help illuminate whether weakness in the housing and financial sectors is undercutting the overall economy, possibly leading to a recession.
Quincy Krosby, chief investment strategist at The Hartford, contends the news from growth in Midwest manufacturing to the weak housing report could have an outsize effect on stocks because of the session's light volume.
"What you have is a very thinly traded market so any news, whether it's good news or bad news, can skew the market actually quite dramatically one way or the other," she said.
In early afternoon trading, the Dow Jones industrial average fell 49.75, or 0.37 percent, to 13,309.86. The Dow had risen more than 91 points before the arrival of the housing data.
Broader stock indicators also fell. The Standard & Poor's 500 index lost 3.38, or 0.23 percent, to 1,472.99, and the Nasdaq composite index fell 10.27, or 0.38 percent, to 2,666.52.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to a light 525.3 million shares.
Bond prices rose sharply as investors looked for the assurances of U.S.-backed investments. The yield on the 10-year Treasury note, which moves opposite its price, fell to 4.07 percent from 4.19 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude moved up 44 cents to $97.06 per barrel on the New York Mercantile Exchange. The rise in recent days has renewed talk of the psychological benchmark of $100. Oil saw its peak of $99.29 on Nov. 21.
The economic readings arriving Friday painted a mixed picture.
The pace of sales of new homes in November proved much weaker than economists had been expecting. Wall Street had predicted sales would drop about 1.8 percent to a pace of 715,000.
In a bright spot, the purchasing managers index, considered a precursor of the national Institute for Supply Management report being released Wednesday, rose to 56.6 from 52.9 in November. Economists, on average, had been expecting a showing of 52.0, according to Dow Jones Newswires.
In one sign of weakness, the Chicago PMI's December employment index fell to 49.0 from 54.4 in the prior month. Wall Street regards solid employment as the crucial underpinning of the economy's well-being because it feeds consumer spending, which accounts for more than two-thirds of U.S. economic activity.
Krosby said the turmoil in Pakistan could make investors leery of holding big positions heading into a holiday weekend.
While the markets are open Monday, many investors are likely to stay home ahead of the New Year's Day.
"I don't think that anyone at this stage wants to stake out a new position," she said.
In corporate news, a New York state regulator said Warren Buffett's Berkshire Hathaway will receive a license to open a bond insurance business in the state. Berkshire Hathaway said Friday it agreed to buy NRG N.V., the reinsurance unit of ING Group said for about $435.7 million (euro296.5 million) in cash.


Updated : 2021-03-09 16:11 GMT+08:00