Stocks mixed after surprise drop in housing data

By: AP
By: AP

NEW YORK – Investors are reining in their optimism about an economic rebound after housing construction tumbled to a record low in April.

Stocks fluctuated in light trading Tuesday following the surprise tumble in construction data and a cautious outlook from leading home improvement store Home Depot Inc.

The Commerce Department reported that construction of homes and apartments fell 12.8 percent last month to the lowest pace on records going back a half-century. Analysts had expected housing starts to rise.

The report did contain some positive signs including a rebound in single-family construction, which partly offset a drop in apartment building.

Investors sent stocks sharply higher on Monday after taking encouragement from Home Depot rival Lowe's Cos. and an improving outlook for banks. The poor housing starts data seemed to diminish hopes that a three-year slide in housing was hitting a bottom, something economists say is vital for an economic rebound.

"The housing number on the surface was horrible," said Alan Valdes, vice president at Hilliard Lyons in New York. But he said the whittling away of inventory will help prices eventually.

Valdes noted that the light trading volume ahead of the long Memorial Day weekend meant the market was likely to drift barring any news that could shape the mood on Wall Street.

In late morning trading, the Dow Jones industrial average rose 14.18, or 0.2 percent, to 8,518.26. The Standard & Poor's 500 index rose 3.43, or 0.4 percent, to 913.14, and the Nasdaq composite index rose 3.65, or 0.2 percent, to 1,736.01.

The Dow jumped 235 points Monday, making up three-quarters of last week's losses. Major stock indicators all rose about 3 percent. Stocks had tumbled the week before on worries that a recovery might be further off than hoped, interrupting a rally that has left the Standard & Poor's 500 index up 34.5 percent since March 9.

Home Depot fell $1.30, or 5 percent, to $24.72 after the company said its markets are still under pressure. Profits at the nation's largest home improvement retailer climbed 44 percent as the company booked fewer charges.

Luxury retailer Saks Inc. posted a loss for the first quarter as it struggles with the pullback in spending by its wealthy customers. But the stock jumped 94 cents, or 23 percent, to $5.02 after results beat analysts' expectations as the chain benefited from cost cuts.

In other trading, the Russell 2000 index of smaller companies fell 1.30, or 0.3 percent, to 493.49.

About three stocks rose for every two that fell on the New York Stock Exchange, where volume came to 397.9 million shares.

Bond prices fell, pushing the yield on the 10-year Treasury note up to 3.27 percent from 3.24 percent late Monday.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell 22 cents to $58.81 per barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average jumped 2.8 percent. In afternoon trading, Britain's FTSE 100 rose 0.7 percent, Germany's DAX index rose 2.7 percent, and France's CAC-40 rose 1 percent.

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