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Stocks Retreat on Housing Market Worries

Posted on: Wednesday, 25 July 2007, 12:20 CDT

By MADLEN READ

NEW YORK - Wall Street seesawed Wednesday as investors weighed signs of a worsening housing market and lending climate against strong earnings from Amazon.com Inc. and Boeing Co.

The stock market - lurching up, down, and then up again - still appeared jittery after Tuesday's 226-point tumble in the Dow Jones industrial average. The big drop was triggered by a few disappointing profit reports and forecasts, notably from mortgage lender Countrywide Financial Corp.

The National Association of Realtors on Wednesday confirmed that the housing market is far from recovery when it reported that sales of existing homes dropped 3.8 percent in June to the slowest rate in more than 4 years. The figure was worse than analysts expected, and followed data from the Mortgage Bankers Association showing mortgage applications fell for the first time in four weeks to a five-month low.

Some market watchers worry that deteriorating lending conditions will cork this year's huge stream of dealmaking. Still, the acquisitions keep coming: Siemens AG Wednesday said it will sell its VDO auto parts unit to Germany's Continental AG in a $15.67 billion deal.

Wall Street is trying to assess whether problems involving risky home lending will hurt the broader economy.

"It's an open-ended unknown, and that's the problem," said Richard E. Cripps, chief market strategist for St. Louis-based broker Stifel Nicolaus. He added, though, the stock market's volatility is not necessarily a bad thing. "It's shaking a tree, and it's shaking out the bad apples, shaking out investors' concerns. The overall picture is pretty constructive for equities."

In late morning trading, the Dow Jones industrial average rose 51.87, or 0.38 percent, to 13,768.82, after trading up more than 100 points in early trading and then trading down more than 30.

Broader stock indicators also rose in wobbly trading. The Standard & Poor's 500 index rose 5.40, or 0.36 percent, at 1,516.44, and the Nasdaq composite index gained 8.64, or 0.33 percent, to 2,648.50.

Bond prices rose as stocks climbed, pushing the yield on the benchmark 10-year Treasury note down to 4.90 percent from 4.95 percent late Tuesday. The dollar rose against other major currencies, while gold prices also advanced.

Light, sweet crude for September delivery rose 29 cents to $73.85 a barrel on the New York Mercantile Exchange. The U.S. government said crude oil supplies fell and gasoline stockpiles rose, as expected.

Amazon.com Inc. surged $16.74, or 24 percent, to $85.99, after the Web retailer said its second-quarter profit more than tripled on strong sales of books, music and electronics worldwide.

Boeing Co., one of the 30 Dow components, rose $3.04, or 2.9 percent, to $106.82. It posted a $1.1 billion profit in the second quarter, up from a year-ago loss, as it gets closer to overtaking its European rival Airbus in deliveries.

Merck & Co., another Dow company, also advanced $1.22, or 2.38 percent, to $52.96 after agreeing to buy NovaCardia Inc., a clinical-stage pharmaceutical company focused on cardiovascular diseases.

Though investors are mainly focused this week on corporate earnings and companies' forecasts for the rest of the year, they will also be reading the Federal Reserve's Beige Book later Wednesday. The report details economic conditions in various parts of the country.

Advancing issues outnumbered decliners by about 9 to 5 on the New York Stock Exchange, where volume came to 717.3 million shares.

The Russell 2000 index of smaller companies rose 5.88, or 0.72 percent, at 817.74.

Overseas, Japan's Nikkei stock average fell 0.80 percent. In afternoon trading, Britain's FTSE 100 was up 0.30 percent, Germany's DAX index was down 0.49 percent, and France's CAC-40 was down 0.28 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Source: Associated Press/AP Online

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