News at a Glance
More Losses: Sell-off stretches into second day.
Sticker Shock: Core PPI jumped 0.7% in July.
Awaiting a Floor: Building permits fell last month.
Orange Surprise: Home Depot beats the Street.
The Lowdown
Disappointing readings on the economy and higher energy prices kept traders on the defensive Tuesday.
Traders extended the sell-off into its second day on a bump in oil prices, an unexpectedly high reading of the Producer Price Index and a decline in a leading indicator for the housing market. The Dow Jones Industrial Average lost 131 points at 11349. The Nasdaq dropped 33 to 2384, and the S&P 500 gave back 12 at 1267.
For the second straight day, heavy losses in financials weighed on the indexes, as traders showed concern over the fallout of the credit crisis in an environment of slow growth and higher core inflation.
The core PPI surged 0.7% in July, the largest single-month gain since November 2006 and a jump more than three times higher than economists had expected. The overall PPI also topped consensus estimates, as energy prices continued to apply upward pressure to the index.
The housing sector received some mixed news. Housing starts fell last month but came in a bit above consensus estimates, while the annual rate of building permits declined and disappointed in July. Meanwhile, Dow component Home Depot (HD) posted a sharp drop in second-quarter profit, but the firm still shocked analysts by beating their estimates. The announcement came a day after a similar earnings surprise from Lowe's (LOW) and a steady reading on builder confidence.
In energy, crude oil futures sprang back as the dollar lost ground and traders grew more confident in a rebound in gasoline demand. By 4 p.m., crude had picked up $2.38 on the day at $115.25 a barrel. Energy stocks rose, as well.
Corporate News
Home Depot (HD) posted a 24% decline in second-quarter profit, but that was good enough to top Wall Street estimates. The nation's largest home improvement retailer earned $1.2 billion, or 71 cents a share, down from $1.59 billion, or 81 cents a share, in the year-ago period. Analysts had been looking for 61 cents a share. Home Depot saw its second-quarter sales fall 5.4%, as the housing market took a toll on demand.
General Motors (GM) will begin offering employee pricing on most of its remaining 2008 cars and trucks and some 2009 models to all of its customers on Wednesday, the firm said. Such discounts typically lower vehicles' sticker prices by about 10%, the the Associated Press reported.
Lehman Brothers (LEH) has begun shopping a piece of its investment-management arm, The Wall Street Journal reported, citing anonymous sources. The arm includes Neuberger Berman, an umbrella unit that handles private clients, private equity and hedge funds. Analysts have valued the unit as high as $10 billion.
General Dynamics (GD) has agreed to buy Jet Aviation in an all-cash deal worth $2.25 billion, the firm said. General Dynamics will continue to function as a defense contractor, and Jet Aviation will remain a boutique garage for business aircraft.
The Economy
The Producer Price Index rose by 1.2% in July, slowing from a June increase of 1.8%, the Labor Department said. The core PPI, which excludes food and energy prices, rose 0.7% in July, up from a 0.2% increase in June. Eonomists had predicted the headline number would rise 0.6% and that the core index would climb 0.2%. REPORT
Housing starts fell to an annual rate of 965,000 units in July, down from a revised rate of 1,084,000 in June, the Commerce Department said. Building permits, a leading indicator for the housing market, dipped to annual rate of 937,000 last month, down from a revised annual rate of 1,138,000 in June. Economists had expected housing starts to come in at an annual rate of 960,000 for July and building permits to come in at an annual rate of 959,000. REPORT
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