Tech outlook, home construction weigh on stocks
U.S. stocks fell on Wednesday, threatening to end three days of gains, following worrying outlooks from two major software makers and a surprise drop in home construction last month.
Business software maker Autodesk Inc
The government said housing starts declined to their lowest level in six months, weighed down by a sharp fall in construction activity for both single-family and multi-family dwellings, an indication the economic recovery remains uneven.
The major indexes have climbed to 13-month highs in recent days. The S&P 500 has ended down only three times in the last two weeks, and many investors say equities remain in a strong uptrend despite Wednesday's intraday fall.
We are of the continued belief that right now the tailwinds propelling the market are still outweighing the headwinds, said Henry Smith, chief investment officer at Haverford Trust Co in Philadelphia.
Smith said low interest rates, government stimulus spending and signs of economic recovery were helping equities.
The Dow Jones industrial average <.DJI> dropped 48.14 points, or 0.46 percent, to 10,389.28. The Standard & Poor's 500 Index <.SPX> fell 4.71 points, or 0.42 percent, to 1,105.61. The Nasdaq Composite Index <.IXIC> lost 19.91 points, or 0.90 percent, to 2,183.87.
Autodesk shares slid 11.1 percent to $24 and weighed on the technology heavy Nasdaq, a day after the company, which licenses its architectural and engineering software to companies on a per-user basis, warned its recovery could be hindered by more job losses. Meanwhile, Salesforce fell 3.4 percent to $63.38.
Technology has been a strong area of the market, and those two results broke the momentum, said Nick Kalivas, vice president of financial research & senior equity index analyst at MF Global in Chicago.
The Dow Jones U.S. Home Construction index <.DJUSHB> climbed 0.4 percent, bolstered by a Citigroup upgrade of Pulte Homes Inc
to buy from hold. Pulte rose 4 percent to $9.98.
While the decline in new construction raised concerns about the recovery, it could bode well for removing remaining inventory from the market, something analysts say must happen for the housing sector to recover.
Losses were kept in check by advances in the financial sector. The S&P financial index <.GSPF> added 0.5 percent.
Craig Peckham, equity trading strategist at Jefferies & Co in New York, said a prediction by hedge fund billionaire John Paulson that Bank of America Corp
One of the most successful investors during the credit crisis is now extending long bets on big banks like Bank of America, Peckham said. Paulson made his comments in an investor note that was reported by Bloomberg News.
Analysts said the inverse correlation between the dollar and equities -- which has helped to boost natural resource stocks by lifting the price of dollar-denominated commodities -- appeared to break down.
Many mining and most energy shares were lower, even as the dollar fell. Freeport McMoRan Copper & Gold Inc
Oil fell 0.6 percent, while the dollar fell 0.3 percent to a basket of currencies <.DXY>.
(Reporting by Edward Krudy; editing by Jeffrey Benkoe)
© Copyright Thomson Reuters 2024. All rights reserved.