Indexes fell Thursday after a drop in existing home sales. Friday's watch list: new home sales, durable goods orders, consumer sentiment
U.S. stock indexes finished lower Thursday on profit taking and mixed economic news, though some late buying lifted quities from earlier lows.
On Thursday, the 30-stock Dow Jones industrial average ended lower by 41.11 points, or 0.42%, at 9,707.44. The broad Standard & Poor's 500-stock index was down 10.09 points, or 0.95%, at 1,050.78. The tech-heavy Nasdaq composite index lost 23.81 points, or 1.12%, to 2,107.61.
On the New York Stock Exchange, 23 stocks were lower in price for every seven that advanced. Breadth on the Nasdaq was 20-6 negative.
Stocks weakened after a report showing an unexpected decline in August existing home sales raised concerns about the health of the U.S. recovery and put the spotlight on Friday's reports on August new home sales and durable goods orders, and the University of Michigan's September consumer sentiment index.
The existing home sales dip countered a bigger than expected drop in weekly jobless claims.
Apple Inc. (AAPL) and some other tech names were up on a FASB accounting change that could boost reported results for some firms in the sector.
Treasuries were higher after a well-received auction of $29 billion in seven-year notes Thursday afternoon.
The dollar index was higher in reaction to the Federal Reserve's decision Wednesday to say it now intends to exit agency debt and mortgage-backed markets in the first quarter, and reiterate its intent to exit purchases of long-term Treasuries in October. In addition to the Fed, the Bank of England, European Central Bank and Swiss National Bank simultaneously announced plans Thursday to scale back their emergency lending programs that have injected trillions of dollars into banks.
Gold and oil futures skidded as the dollar index surged.
European markets ended lower, with benchmark indexes in London, Paris, and Frankfurt each falling about 1.7%. Asian markets ended mixed: Tokyo stocks rose 1.67%, Hong Kong fell 2.52%, while Shanghai rose 0.38%.
The market was watching the start of the meeting of the Group of 20 industrialized nations in Pittsburgh. U.S. President Barack Obama was expected to push for a global economic rebalancing, while French President Nicolas Sarkozy was emphasizing pay caps for executives in the financial sector.
Reuters reported German Chancellor Angela Merkel warned a U.S. drive to rebalance the global economy risked distracting the G20 from a more urgent need for market regulation. Merkel's remarks underscored differences between some of the world's largest economies as she, U.S. President Barack Obama and other G20 leaders headed for talks on how to respond to the global financial crisis.
In economic news Thursday, sales of existing homes unexpectedly dropped 2.7% in August to an annual rate of 5.10 million. The consensus was for a rise to 5.35 million. The inventory of unsold homes dropped 10.8% to 3.63 million, cutting the supply to 8.5 months at the current selling pace from 9.3 months last year (normal is 6). The median single-family home price fell to $177,500, down 12.1% from a year earlier. Sales fell in all four Census regions.
The sales pace remains 3.4% above last August, but is still highly disappointing, notes S&P chief economist David Wyss. "The data are weaker than expected, and suggest the recovery in housing will be very slow," he wrote in a note Thursday.
U.S. jobless claims dropped 21,000 to 530,000 in the week ended Sept. 19, vs. a revised 551,000 previously (from 545,000). The 4-week moving average fell to 553,500 from 564,500 previously. Continuing claims fell 123,000 to 6,138,000 in the week ended Sept. 12, after a revised 158,000 increase to 6,261,000 (from 6,230,000).
"Despite the improvement in claims from the mid 600k levels in the Spring, the level remains uncomfortably high and are only slowly gravitating to the 450k area that should be evidenced by next quarter if payroll figures are on track to reach unchanged readings by the end of the year," says Action Economics.
Reuters reported Britain's economy is showing signs of recovery, but any improvement is likely to be small compared to the sharp drop in output caused by the global financial crisis, Bank of England Governor Mervyn King said in a published interview. King's remarks on growth are broadly in line with testimony he gave to British lawmakers last week, and he also reiterated his view that Britain needed to rebalance its economy to focus more on exports.
German business confidence rose to a 12-month high in September, indicating Europe's largest economy will gather strength after exiting its worst recession since World War II.
In company news Thursday, Bed Bath & Beyond (BBBY) posted second-quarter earnings per share (EPS) of $0.52, vs. $0.46 one year earlier, on a 3.3% total sales rise. Same-store sales fell slightly. Wall Street was looking for $0.48 EPS.
Shares of A123 Systems (AONE), a maker of rechargeable lithium-ion batteries and battery systems, shot higher Thursday in their first day of public trading.
Red Hat (RHT) reported second-quarter non-GAAP EPS of $0.20, vs. $0.14, on a 12% revenue rise. Deferred revenue rose 17% to $581 million. Red Hat posted $0.15 GAAP EPS. The company said financial performance was strong across all of its key metrics.
Paychex (PAYX) reported first-quarter EPS of $0.34, vs. $0.41, on a 6% total revenue decline. The company said weak economic conditions, the credit crisis in the financial markets, and extremely low investment rates of return continue to challenge financial results for fiscal 2010. It sees a fiscal 2010 total revenue decline of 2%-5%, and a net income decline of 10%-12%.
McCormick & Co. (MCK) reported third-quarter earnings per share of $0.57, vs. $0.52, on a 1% sales rise (6% in local currency). The company reaffirmed its 2%-3% 2009 sales growth forecast; based on strong year-to-date profit performance and a positive outlook for the upcoming holiday season, the company narrowed its 2009 EPS forecast to $2.26-$2.28 from $2.24-$2.28.
Citigroup (C) may sell or shut some of its 1,001 branches in the U.S. and Canada as the bank shrinks following last year's $45 billion federal bailout, a person familiar with the matter said in a Bloomberg News report.