RISMEDIA, March 2009-(MCT)-A trade group’s report of another monthly decline in home sales on this month helped propel Wall Street lower, but the data also offered evidence of market forces in play that could speed up the nation’s eventual economic recovery.
The Dow Jones industrial average came off session lows to end at 7,270.89, off 80.05 points. At Tuesday’s close, the blue-chip index was down 8.1 percent so far for February and off 16.2 percent this year.
The S&P 500 Index declined 8.24 points to 764.9, and the Nasdaq Composite shed 16.4 points to 1,425.43.
Financials directed the broader market higher and lower during the day, with Lincoln National Corp. among the hardest hit, its stock falling 14 percent after the insurer cut its dividend by 95 percent to save more than $200 million a year.
“Investors don’t like uncertainty, and there is a tremendous amount of uncertainty today in the credit market and housing. The bottom line is the markets will continue to be under pressure until investors get a better sense of the government’s plan,” said Mark DeGennaro, managing director, Gruppo, Levey & Co.
Equities extended their losses early on after the National Association of Realtors reported existing-home sales in January fell 5.3 percent, a faster pace than forecast, while prices fell to near six-year lows.
The one potentially encouraging trend in the otherwise dismal report, analysts said, is another monthly drop in supply from year-ago levels.
“We’ll have to see if that trend continues. Inventory is already down sharply in the new home market, and if the existing home market can follow suit, it will eventually help stabilize housing,” said Mike Larson, an analyst at Weiss Research Inc.
When sales stabilize, there will be fewer available homes to purchase, quickening the pace of an economic turnaround, Larson and other analysts said.
“The supply-demand fundamentals are working themselves out,” said Dan Greenhaus, an analyst with the equity strategy group at Miller Tabak & Co.
What remains to be seen is how quickly that scenario plays out.
“Unfortunately, we’re still oversupplied to the tune of more than a million homes- roof positive the healing process will take time,” Larson said.
Underlying the inventory decline is a severe under-building of homes relative to population growth of about 3 million a year, said Tony Crescenzi, bond market strategist at Miller Tabak.
“The excess is still massive, at close to 1.5 million homes, but the trend is down and is highly likely to stay this way in 2009- eople need shelter and scant new shelter is being built,” said Crescenzi.
© 2009, MarketWatch.com Inc.
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