New York: US stocks fell on Wednesday as FedEx warned about higher costs, housing starts fell to a five-month low and new concerns surfaced over Spain’s fiscal problems.
The Morgan Stanley housing index fell 1.4% after the government said housing starts fell more than expected in May as a homebuyer tax credit expired.
Further weighing on sentiment, FedEx Corp said higher costs would constrain 2011 earnings, and cell phone maker Nokia said profits at a key unit would be weaker than expected through 2010. and
FedEx fell 2 percent to $81.30, while NY-traded shares of Nokia tumbled 9 % to $8.92.
“Housing and the disappointing outlook from FedEx are causing the market early to give up some of the substantial gains of yesterday,” said Jim Awad, managing director at Zephyr Management in New York.
“Fears about Europe and its impact on banks and liquidity worldwide are re-emerging,” he said.
The premium that investors demand to hold 10-year Spanish government bonds rather than euro zone benchmark German Bunds hit a euro lifetime high, even as the EU and International Monetary Fund denied a report they and the US Treasury were preparing a financial safety net for Spain.
The Dow Jones industrial average dropped 34.39 points, or 0.33%, to 10,370.38. The Standard & Poor’s 500 Index fell 3.58 points, or 0.32%, to 1,111.65. The Nasdaq Composite Index lost 7.18 points, or 0.31%, to 2,298.70.
The S&P 500’s ability to stay above its 200-day simple moving average — just above 1,109 — will be tested after the benchmark closed past that level for the first time in a month on Tuesday.
US President Barack Obama meets with BP Plc executives later Wednesday and will demand that the company set aside billions of dollars to cover damages from the Gulf of Mexico oil spill.
Bank of America-Merrill has ordered traders not to enter into oil trades with BP that extend beyond June 2011, a source told Reuters.
BP’s New York-traded stock lost 4.6% to $29.94.