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Market Update by Will Swarts (Author Archive)
Stocks Close Mixed as Investors Pare Back
News at a Glance
- Housing Mixed: Case-Shiller rises but shows some price declines.
- Lost Confidence: Consumer confidence reading shows bigger than expected drop.
- Gross Grim: Pimco bond guru warns rally is waning.
- Crude Climbs: Oil back above $79 a barrel.
The Lowdown
Stocks closed still mired in a muddle Tuesday as they struggled to rebound from discouraging consumer confidence data.
The Dow Jones Industrial Average managed a gain of 14 points after swinging back and forth throughout the session, closing at 9882. The Nasdaq was down 26 at 2116 and the S&P 500 dropped 4 to 1063.
Long-term Treasury futures reached their highest prices of the day following the auction of a record $44 billion in two-year notes, which saw a bid-to-cover ratio of 3.63, much stronger than the average of 2.92 from the last six two-year auctions.
The Conference Board reported that its consumer confidence index fell for October, a worse than expected decline to 47.4 The Case-Shiller home-price indexes showed U.S. home prices logged their third monthly increase in August.
The indexes showed prices in 10 major metropolitan areas fell 10.6% in August from a year earlier but rose 1.3% from July. In 20 major metropolitan areas, home prices dropped 11.3% on the year but were up 1.2% from the previous month.
The mixed open follows two consecutive days in the red for stocks, which amounted to the Dow's first set of back-to-back triple-digit declines since June. The slump came on skepticism about a rally that has lasted seven months and pushed the Dow to its highest point of the year last week.
The Case-Shiller data showed that compared with the previous month, only Charlotte, Cleveland and Las Vegas posted declines. Month-to-month gainers were led by Minneapolis, which posted a 3.2% gain, and San Francisco, which rose 2.8%. Cleveland fared worst, falling 0.5%.
The latest numbers come amid recent mixed data on the housing market. Last week, the Commerce Department said new-home building rose a third time in four months during September, while the National Association of Realtors said demand for previously owned homes surged in September. However, the National Association of Home Builders gauge of builders' confidence slipped in October for the first time in four months.
European stocks were mixed, and Asian markets closed down.
As of 4:03 p.m., oil futures traded on the Nymex were down 19 cents from their afternoon close at $79.36 a barrel.
Corporate News
- BP (BP) beat earnings expectations, and shares rose despite a drop in crude prices from the year-ago quarter.
- TD Ameritrade Holding (AMTD) beat Street expectations with a lower than expected drop in profits from a year ago. It reported earnings of 26 cents a share, down from 29 cents a share a year ago. Wall Street analysts expected, on average, a quarterly profit of 22 cents a share.
The Economy
- Pimco bond fund manager Bill Gross warned that the six-month rally in risk assets is near its end, writing that "risks outweigh rewards" from any move out into riskier assets based on hopes of an economic recovery. Gross noted in his monthly letter to investors that the total U.S. government bond market returns just 3.5%. "Investors must recognize that if assets appreciate with nominal GDP, a 4–5% return is about all they can expect even with abnormally low policy rates," he wrote. REPORT
- The Conference Board reported consumer confidence for October fell to 47.4, down from 53.4 in September, a worse than expected decline. Lynn Franco, director of the Conference Board Consumer Research Center said "Consumers' assessment of present-day conditions has grown less favorable, with labor market conditions playing a major role in this grimmer assessment. In fact, the Present Situation Index is now at its lowest reading in 26 years (Index 17.5, Feb. 1983). The short-term outlook has also grown more negative, as a greater proportion of consumers anticipate business and labor market conditions will worsen in the months ahead. Consumers also remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays." REPORT
Dow Jones Newswires contributed to this report.
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