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Housing Data Hem In Stocks

Robert Holmes

Stocks were volatile in a low-volume session Friday and ultimately closed flat as weak housing data ran up against positive headlines out of the financial sector.

After spending time in both positive and negative territory, the Dow Jones Industrial Average rose 6.26 points, or 0.05%, to 13,365.87. The S&P 500 tacked on 2.12 points, or 0.14%, to 1478.49, and the Nasdaq Composite slipped 2.33 points, or 0.09%, to 2674.46, pressured by a loss of 2.5% in Sirius Satellite Radio (SIRI).

The major averages saw early gains evaporate and went under water following a miserable read on new home sales for November. The Census Bureau said that sales plummeted 9% last month to 647,000 annualized units. Making things worse was news that new-homes inventory rose to 9.3 months.

Following the report, the Philadelphia Housing Sector Index dropped 1.1%.

"There is no end in sight as far as housing is concerned," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "It's going to continue to be a drag on the economy, so this number isn't so surprising. We need to see housing prices continue to decline in order to eliminate inventories."

Volume on the New York Stock Exchange hit 2.36 billion shares, with advancers matching decliners. On the Nasdaq, volume touched 1.31 billion shares, and losers edged winners 8 to 7.

With only one day of trading remaining for 2007, many market participants are hoping the major averages will end the year on an upbeat note. Thus far, the Dow is up 7.2%, and the S&P 500 has added 4%. The Nasdaq has been the best performer, rising 10.8%.

During the holiday-shortened week, the Dow declined by 0.6%, and the S&P 500 ended down 0.4%. The Nasdaq slid 0.7%.

Financials were again in the spotlight, this time after a report in The Wall Street Journal that several lenders were contemplating selling assets. Among them, both Citigroup (C) and HSBC (HBC) could sell anything from branches to auto-financing units, the report said.

Elsewhere, billionaire investor Warren Buffett's investment vehicle Berkshire Hathaway (BRK.A) was in the news again after saying it will acquire a reinsurer from Dutch finance company ING (ING) for more than $400 million.

Additionally, Berkshire said it will start its own bond insurer for cities, states and counties, according to the Journal. That sent shares of current bond insurer MBIA (MBI) sliding 15.9% and competitor Ambac Financial (ABK) lost 13.8%.

Both items come three short days after Berkshire said it purchased a 60% stake in Marmon Holdings, a privately held industrial conglomerate, for $4.5 billion. Shares of Berkshire rose 2.4% for the session.

Last time out, it was financials that led the market to the downside. Worse-than-expected economic data and the assassination of former Pakistani Prime Minister Benazir Bhutto also contributed to the negative sentiment.

At the end of Thursday's session, the Dow was down 192.08 points, or 1.42%, to 13,359.61, while the S&P 500 lost 21.39 points, or 1.43%, to 1476.27. The Nasdaq was off 47.62 points, or 1.75%, at 2676.79.

Also on the economic docket, the Chicago purchasing managers' index for December came in at 56.6 in December, compared with last month's 52.9. Any number above 50 signals expansion.

U.S. Treasury prices were rallying. The 10-year note rose 31/32, yielding 4.08%. The 30-year bond added 1-31/32 in price, yielding 4.50%.

Commodity prices were mixed. Oil was down 62 cents to close at $96 a barrel, gold futures added $10.90 to $842.70 an ounce, and silver tacked on 4 cents to $14.86 an ounce.

Overseas markets felt the repercussions of Bhutto's death. Overnight in Asia, Hong Kong's Hang Seng slipped 1.7%, and Japan's Nikkei lost 1.6%. Among European bourses, London's FTSE 100 eased 0.3%, and the Paris Cac 40 was flat.