Stocks fall on softening housing market
EmptyNEW YORK-- Stocks stumbled Tuesday as investors grew wary when new data raised the possibility that the nation's weak housing market would seep into the broader economy and crimp consumer spending.
A housing index released Tuesday by Standard & Poor's showed that prices of single-family homes across the nation fell in January compared to a year ago, registering the lowest growth since January 2004. Also, Lennar Corp., one of the nation's largest homebuilders, said its first-quarter profit tumbled 73% and warned that it probably won't meet its 2007 earnings guidance.
Wall Street has been nervous lately that a drop in housing values will further weaken subprime mortgage lenders, who make loans to people with poor credit, and make consumers feel less wealthy and rein in spending. Consumer spending makes up about two-thirds of U.S. economic activity.
The Conference Board said Tuesday that its March consumer confidence index fell to 107.2, the lowest level since November and a decline that was larger than Wall Street expected. The index was at 112.5 a month earlier, which had been its highest level in five-and-a-half years.
Analysts noted, however, that lower confidence doesn't necessarily translate to a drop in spending, especially with the labor market as stable as it is. Furthermore, the Dow Jones industrials rose every day last week and the recent pullback has erased only a small portion of that 370-point weekly gain -- the largest since March 2003.
According to preliminary calculations, the Dow fell 71.78, or 0.58%, to 12,397.29. Tuesday's selloff put the blue-chip index back into negative territory for the year.
Broader stock indicators also fell, but remain higher for 2007. The Standard & Poor's 500 index lost 8.89, or 0.62%, to 1,428.61, and the Nasdaq composite index declined 18.20, or 0.74%, to 2,437.43.