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Business News/ Money / Personal-finance/  Growing economic fears drive Wall Street lower
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Growing economic fears drive Wall Street lower

Growing economic fears drive Wall Street lower

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New York: US stocks fell to their lowest level in seven weeks on Tuesday as an unexpectedly large drop in home sales ratcheted up concerns that the economic recovery is even weaker than had been feared.

The Dow and S&P 500 racked up their fourth day of losses in a row after an industry group reported that sales of US existing homes in July fell to their slowest pace in 15 years.

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“What’s really driving us is the sense that the economic outlook is unraveling a bit," said Bernie McSherry, senior vice president at Cuttone & Co in New York.

With housing a linchpin of the US consumer economy, the latest data cast doubt on the pace of recovery and added fuel to investors’ recent search for safety.

Prices of US Treasuries soared, sending two-year yields to another record low. On the S&P 500, defensive plays telecoms and utilities were the only sectors to gain for the day.

Economically sensitive companies were the biggest drags on the Dow, including plane maker Boeing, which fell 3.7 percent to $60.93. Banks were also among hardest hit shares, with the KBW Bank index down 2.2%.

Home building and related stocks slipped but came off their lows after hitting technical support. The PHLX housing index fell 1.1% to 89.53, clawing back from a 3% drop after it encountered support near its July low, right above 87.

The Dow Jones industrial average fell 133.96 points, or 1.32%, to 10,040.45. The Standard & Poor’s 500 Index shed 15.49 points, or 1.45%, to 1,051.87. The Nasdaq Composite Index lost 35.87 points, or 1.66%, to 2,123.76.

The broad Russell 2000 index was down 1.2% at 595.59, but held above its July intraday low of 587.67.

A report that at least seven of the 17 top Federal Reserve officials at the U.S. central bank’s August policy meeting had reservations about the decision to buy more Treasuries also rattled investors.

Some bargain hunting helped the indexes ease off lows. The S&P approached short-term oversold levels, dropping below 35 on the 14-day relative strength index. A level of 30 indicates the index could be oversold. The S&P also fell below its lower Bollinger band at around 1,053.

Medical device maker Medtronic Inc plunged 10.8% to $31.21 after it reported a decline in quarterly sales and cut its outlook. The drop weighed on shares of rival companies, and the health-care sector -- traditionally a defensive group -- fell 2%.

Merger and acquisitions activity continued to play a role in the market, with news on takeover target 3PAR Inc.

Dell Inc is preparing to sweeten its offer for 3PAR, according to a Bloomberg report. The move comes a day after Hewlett-Packard Co bid $1.6 billion for the data storage company, topping Dell’s original offer.

Shares of 3PAR gained 3.6% to $27.04, while Dell fell 3% to $11.59. HP, a Dow component, slid 1.7% to $38.39.

All three indexes closed at their lowest level in seven weeks.

About 8.38 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq. Although volume was below last year’s estimated daily average of 9.65 billion, it was the best in almost two weeks. The stronger volume on a day of losses could add to the bearish argument.

Declining stocks handily outnumbered advancing ones on the NYSE by 2,286 to 730, while on the Nasdaq, decliners beat advancers 1,965 to 670.

In world markets, major European indices ended down, while Asia markets ended mixed. In commodities, oil futures for October delivery fell $1.47 to close at $71.63 a barrel. Gold for December delivery added $4.90, closing at $1,233.40 an ounce.

In bonds, the yield on the 10-year note fell to 2.5% from 2.6% late Monday. Yields have been near historic lows as investors have sought ‘safe’ investments during times of economic uncertainly.

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Published: 25 Aug 2010, 09:31 AM IST
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