US Stocks Tumble Even As Home Sales Hit Post-Recession High
New York (Aug 20) Stocks extended a steep decline Thursday morning as better-than-expected housing and business activity data paved the way for a September rate hike.
The S&P500 was down 1%, the Nasdaq slid 1.2%, and the Dow Jones Industrial Average dropped 1.1%.
Existing home sales jumped 2% to a seasonally adjusted annual rate of 5.59 million in July, according to the National Association of Realtors. That marked its highest level since February 2007 and a new post-recession high. Economists had expected a reading of 5.48 million.
Business conditions in the Philadelphia area improved to a reading of 8.3 in August from 5.7 in July, according to the Philadelphia Fed Business Outlook survey. The reading was better than an expected increase to 7.
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Initial jobless claims climbed for the fourth consecutive week for the week ended Aug. 15. The number of new filings for unemployment benefits increased 4,000 to 277,000, above an expected 271,000 reading. However, initial claims remained below 300,000 for a 24th week, the best run in 15 years.
Stronger data on an improving economy supported the belief the Federal Reserve could hike rates as soon as September. Stocks closed lower on Wednesday after minutes from the most recent Federal Open Market Committee kept things ambiguous, though a September increase was not ruled out.
"While minutes of the July 28-29 FOMC meeting offered no 'smoking gun' suggesting imminent rate hikes, we believe there was plenty in the minutes to suggest that the Fed could still begin rate hikes in September," said Gennadiy Goldberg, U.S. strategist at TD Securities.
Crude oil prices recovered from earlier losses but failed to recoup a more than 4% decline a day earlier. Commodity markets remained under pressure after inventories data showed oil stocks increased by 2.6 million barrels in the week ended Aug. 14 compared to estimates of a decline of 1.2 million barrels. West Texas Intermediate crude added 0.5% to $41 a barrel on Thursday.
Wednesday's drop was still hitting the energy sector. Among the worst performers, PetroChina (PTR) dropped more than 3%, Phillips 66 (PSX) fell 0.5%, and Chevron (CVX - Get Report) slid 0.7%. The Energy Select Sector SPDR ETF (XLE) slipped 0.5%.
Valeant Pharmaceuticals (VRX - Get Report) was slightly higher after it agreed to acquire for $1 billion Sprout Pharmaceuticals. The all-cash deal would also include a one-off $500 million payment, according to The Wall Street Journal.
NetApp (NTAP - Get Report) added more than 3% after reporting better-than-expected quarterly profit and sales in its first quarter and guiding for an above-consensus second quarter. An increase in software and hardware maintenance sales helped to offset a decline in product sales.
Disney (DIS - Get Report) dropped nearly 5% after Bernstein downgraded shares to 'market perform' from 'outperform' over concerns for media stocks in general. Analysts said valuations need to be revised given the risk associated with declining affiliate fees.
Sears (SHLD - Get Report) shares were on watch after the embattled retailer reported a heavy net loss and double-digit slump in sales. The company posted a net loss of $2.40 a share on revenue of $6.21 billion, down 23% from a year earlier.
Source: TheStreet
