Russell down, Dow flat
The Russell 2000 (NYSE: IWM) is firmly in negative territory while the Dow is flat. At 2:22 p.m. the small-cap index had lost 4.79 points, or 0.62%, to 771.33. The Dow Jones Industrial Average (INDU) had added 2.43 points, or 0.02%, to 13,214.42.
Trading continues volatile, with investors weighing news of cautiously optimistic economic data against fears of a deepening credit crunch.
The bears felt emboldened on renewed concerns about loans and securities derived from home mortgages following news that Bear, Stearns & Co. Inc. (NYSE: BSC) will prevent investors from pulling their money out of a troubled hedge fund.
That’s the third case of a fund managed by the New York-based financial services heavyweight feeling the heat after placing bets on securities backed by subprime mortgages. Two similar hedge funds imploded in late June, losing virtually all their value.
Similarly, Australia’s Macquarie Bank warned that two of its debt funds face losses of up to 25%.
But there are signs that the slump in the U.S. housing sector, which caused the subprime mortgage mess when cash-strapped borrowers defaulted on loans as home prices stagnated, has reached bottom.
The National Association of Realtors announced after the start of trading that its monthly index of pending homes sales increased 5% in June, the largest gain in more than three years.
The index hit a seasonally adjusted 102.4 points, above May’s downwardly revised reading of 97.5, but below the June 2006 level of 112.
That indicates that the major declines in home sales have already occurred.
Elsewhere, the price of oil is down about $2 to $76 a barrel.
