Russell slides on economic woes
The Russell 2000 (NYSE: IWM) fell for the second consecutive day while the Dow posted a slim gain on news of bad economic data. The small-cap index lost 2.80 points, or 0.35%, to 803.00. The Dow Jones Industrial Average (INDU) moved up 13.59 points, or 0.14%, to 13,778.65.
The bears overpowered the bulls today following the release of reports that showed a tiring U.S. consumer and once again exposed the ongoing slump in the U.S. housing sector.
Total existing-home sales fell a more-than-expected 4.3% to a seasonally adjusted annual rate of 5.50 million units in August, the National Association of Realtors reported after the start of trading. That’s the sixth drop in as many months. Economists were projecting a more modest decline to a pace of 5.55 million from a level of 5.75 million in July.
Total housing inventory added 0.4% to 4.58 million homes, which at the current pace of sales represents a 10-month supply. In July, the supply of available homes stood at 9.5 months.
“Lower sales contributed to a buildup of unsold inventory,” said NAR senior economist Lawrence Yun in a press release.
Meanwhile, the national median existing-home price increased 0.2% to $224,500 in August, compared with $224,000 a year earlier. Gains in the Northeast and Midwest were offset by declines in the South and West.
Lennar Corp. (NYSE: LEN), the second largest U.S. homebuilder, illustrates the dire state of the housing sector.
The Miami-based company swung to a third-quarter net loss of $513.9 million, or $3.25 a share, compared with a profit of $206.7 million, or $1.30 a share, a year earlier.
That news was enough for futures to slip before the start of trading and to send the major U.S. indices into negative territory with the ringing of the opening bell. The small-cap index never recovered and spent the day languishing in the red, while the Dow managed to rise above the flat line at about 11 a.m. ET and bounced around for the remainder of the session.
In other economic news, consumer confidence in September fell more than forecasted.
The Conference Board reported that its index tumbled to a reading of 99.8, from an upwardly revised level of 105.6 in August. Weaker business conditions and a less favorable job market helped lower the index to its lowest reading in almost two years as American’s view of current-day conditions worsened.
Those saying that the current conditions are good fell to 25.7% from 26.2% a month earlier, while those claiming that conditions are bad increased to 17.9% from 16.3%.
Consumption accounts for about 70% of gross domestic product.
Elsewhere, factory workers at General Motors Corp. (NYSE: GM) continued to strike today as the automaker failed to reach a deal with United Auto Workers union over employee health benefits. Most observers expect a quick resolution, but a prolonged labor dispute could hurt the U.S. economy and accelerate the troubled Detroit-based company further down the road toward bankruptcy.
