Europe unrest reverberates on Wall Street

A dip in home sales and unrest in Europe sent stocks sliding Wednesday, extending the longest losing streak for the S&P 500 since mid-July. European stocks had their worst day in months as unrest threatened to boil over in Greece.

|
Brendan McDermid/Reuters
A trader works on the floor of the New York Stock Exchange Wednesday. Prior to Wednesday's dip, stronger data on the US housing market had insulated stocks from a slackening global economy.

A mixed report about the housing market and unrest in Europe on Wednesday extended the longest losing streak for the Standard & Poor's 500 index since mid-July. Other risky assets, like European stocks and oil, fell more sharply.

The median price of new homes sold in August rose by a record amount, while sales of new homes dipped slightly. Sales in August were up 27.7 percent from a year earlier, but remain at about half the pace economists consider healthy.

Stronger data on the U.S. housing market have insulated stocks in recent weeks from a slackening global economy. Stocks' other main source of support has been the Federal Reserve's program to boost the economy by pumping money in. That idea lost some luster Tuesday after a key Fed official said he doubted it will do much good.

"There was some optimism coming into the market, and that's usually when you're most vulnerable to sell-offs when there are negative headlines" like the Fed official's comments, unrest in Europe and weaker data about the U.S. economy, said Todd Salamone, director of research at Schaeffer's Investment Research.

Indexes had risen to levels they hadn't beat for months or years, Salamone said, creating "an almost perfect storm in terms of the vulnerability to short-term impacts."

The dip in home sales hurt homebuilder stocks. PulteGroup Inc. fell 76 cents, or 4.7 percent, to $15.30; KB Home 51 cents, or 3.5 percent, to $13.90 and Beazer Homes USA Inc. 14 cents, or 3.9 percent, to $3.50.

European stocks had their worst day in months as unrest threatened to boil over in Greece, where deep budget cuts have eroded people's living standards, and Spain, where citizens are resisting a likely bailout from international lenders. Earlier, Asian stocks closed lower.

The euro fell sharply against the dollar, and the price of oil closed below $90 per barrel for the first time since early August.

Rising demand for lower-risk investments fed strong bids for U.S. Treasury debt. The yield on the 10-year Treasury note fell to 1.62 percent from 1.67 percent late Tuesday. A bond's yield falls as its price increases.

The Dow Jones industrial average fell 44.04 points, or 0.3 percent, to 13,413.51. The S&P 500 index fell 8.27, or 0.6 percent, to 1,433.32. The only category that rose was utilities, relatively safe stocks that tend to hold their value when the economy is weak.

The Nasdaq composite average fell 24.03 points, or 0.8 percent, to 3,093.70.

The declines came a day after the worst sell-off for the S&P 500 in three months. Charles Plosser, president of the Fed's Philadelphia branch, told an audience Tuesday that the Fed's effort to support the economy would likely fall short of its goals.

Stocks rallied this month on bold moves by central bankers. They had one of their biggest gains of the year Sept. 6 after Mario Draghi, the president of the European Central Bank, said the ECB would buy unlimited amounts of government bonds to lower borrowing costs for Europe's debt-burdened countries.

A week later, Fed Chairman Ben Bernanke said the Fed will buy $40 billion of mortgage bonds each month until the economy strengthens. It also plans to hold interest rates at super-low levels into 2015.

The S&P soared to a nearly five-year closing high of 1,465 the next day, Sept. 14. Since then, as doubts emerge about the effectiveness of the central banks' actions, it has drifted back to where it was before Bernanke's announcement.

In Europe, tens of thousands of protesters took to the streets in Athens and Madrid, where they clashed with riot police ahead of new rounds of spending cuts and tax hikes. The Bank of Spain warned that the country is in a deep recession, a day after protests in Madrid led to at dozens of arrests and injuries.

Spain's IBEX index fell the most, closing down 3.9 percent. Italy's FTSE MIB fell 3.3 percent, Germany's DAX 2 percent and France's CAC-40 2.8 percent.

The developments in Europe blunted any optimism about the U.S. housing market. Wednesday's report, while mixed, appeared to confirm that the market has hit bottom. Other recent data showed that sales of previously occupied homes jumped in August to the highest level since May 2010. Builder confidence is at a six-year high, and construction of single-family homes rose last month to the fastest annual rate in more than two years.

The fear is that a broader recession in Europe could stall whatever economic recovery is occurring in the U.S., where the housing market has been a major drag for five years.

In corporate news, American Greetings Corp. shares jumped $2.48, or 17.3 percent, to $16.82 after the greeting card company said that a group led by its CEO and chief operating officer wants to take it private in a deal that values it at about $581 million.

Automobile auctioneer Copart hit an all-time high and closed up 43 cents, or 1.6 percent, at $27.82 after a strong fourth quarter that topped Wall Street expectations.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Europe unrest reverberates on Wall Street
Read this article in
https://www.csmonitor.com/Business/Latest-News-Wires/2012/0926/Europe-unrest-reverberates-on-Wall-Street
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe