Housing Data Shake U.S. Stocks

Updated from 10:58 a.m. EDT

U.S. stocks opened weak, fell sharply, then stayed down Thursday as investors digested worse-than-expected data concerning the capsized housing market.

The Dow Jones Industrial Average was down 129 points to 11,502, while the S&P 500 dropped 14 points to 1268. The Nasdaq gave up 21 points to 2305.

The National Association of Realtors reported that existing-home sales declined 2.6% to 4.86 million units in June, falling short of economists' expectations for 4.95 million units. Median single-family home prices fell 6.1% year over year in June.

"We still think home sales have some way yet to fall, but they are not going to keep dropping at the June pace," wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics, in an email. He predicted further price drops for U.S. homes.

"The market cannot heal until the housing market heals," said Michael Pento, senior market strategist for Delta Global Advisors. He said that rates of homeownership in the U.S. are well above historical norms, so there isn't demand for houses. Furthermore, home-to-price ratios are too high, meaning homes are overvalued in historical terms.

The financial sector suffered following the report, as concern mounted over the possibility of additional mortgage-related losses for the banks. Dow members Citigroup (C Quote), AIG (AIG Quote) and JPMorgan Chase (JPM Quote) were all contributing to the index's decline. "Assets held by banks will continue to erode, so I'm not very ebullient on the banking sector," said Pento.

The Labor Department also released jobless claims for the week ended July 19. Initial claims were up 34,000 to 406,000 for the week, and the July 12 figure was revised to 372,000 from 366,000.

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