NEW YORK (AP) — Wall Street gave up a big advance and turned lower yesterday as investors got a renewed case of the jitters ahead of the Federal Reserve’s meeting on interest rates later this week.
The stock market, which has seen huge swings in recent weeks, was initially relieved to hear from the National Association of Realtors that existing home sales declined in May by only 0.3 percent, the slowest in four years but within expectations.
The data wasn’t enough to keep the stock market afloat, so when crude oil prices rose back above $69 a barrel on news of U.S. refinery outages, many investors chose to take money off the table. High energy prices could translate to accelerated inflation — which investors fear the Fed may use as a reason to raise interest rates later in the year. The Fed is scheduled to meet tomorrow and Thursday.
“Without much of a catalyst right now, profit-taking from that big rise earlier this morning is what we’re seeing. The stock market doesn’t like uncertainty,” Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds, said yesterday.
He added that Wall Street is concerned again about the troubles surrounding subprime lending, or lending to people with poor credit histories. Bear Stearns Cos. said last week that two of its hedge funds nearly collapsed after betting on complex securities backed by subprime mortgages; Bear Stearns’ stock fell more than 3 percent yesterday.
The Dow Jones Industrial Average fell 8.21, or 0.06 percent, to 13,352.05, after rising more than 100 points earlier in the day, and falling 185 points on Friday. The Standard & Poor’s 500 Index fell 4.82, or 0.32 percent, to 1,497.74, and the Nasdaq Composite Index lost 11.88, or 0.46 percent, to 2,577.08. The Russell 2000 Index of smaller companies fell 7.29, or 0.87 percent, to 827.46.
A retreat in Treasury yields failed to calm the stock market. The 10-year Treasury note’s yield fell to 5.08 percent from 5.14 percent late Friday, dampened by worries about mortgage-backed securities. If high-risk investments are souring, investors tend to buy safe-haven Treasury issues.
Soaring Treasury yields have played a starring role in the stock market’s volatility this month because higher rates can slow corporate activity; the 10-year yield’s climb above 5 percent knocked the Dow from a record high reached June 4, and since then stocks have been rising and falling fitfully as investors attempt to determine interest rates’ direction.
Last week the three major indexes posted sizable losses: The Dow dropped 2.1 percent, the S&P declined 2 percent and the Nasdaq dipped 1.4 percent.
Central bankers are widely expected to keep the benchmark rate steady at 5.25 percent Thursday, but Wall Street is not sure whether the Fed will alter its stance on inflation, which could mean a rate rise or decrease later in the year.
Today, investors will be closely reading the Conference Board’s June consumer-confidence index and the Commerce Department’s report on May new homes sales. So far, despite the weak housing market, the economy appears to be on the rebound.
“My sense is consumption is still reigning — consumer sales are up,” said Richard Hoyt, market strategist at KDV Wealth Management, pointing to the Commerce Department’s report earlier this month that May retail sales jumped 1.4 percent.
But even if economic data keep coming in strong, analysts predict high volatility in the stock market ahead of second-quarter earnings season, which begins in earnest in mid-July.
Yesterday the dollar rose against the euro and pound but fell against the yen. Gold prices fell.
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