Updated from 4:21 p.m. EDT
Unusually positive housing data failed to keep U.S. stocks afloat Thursday, as a selloff in chips, transports and computer hardware names led the market lower.
After stints in both positive and negative territory, the
Dow Jones Industrial Average
ended down 3.33 points, or 0.02%, at 13,671.92. The
lost 1.48 points, or 0.1%, at 1514.40.
had another rough session, falling 23.90 points, or 0.86%, at 2750.86.
All three indices finished above their lows for the day.
"Continued optimism over upcoming
Federal Reserve rate cuts helped the market rebound in late-day trading, but there's still a tremendous amount of uncertainty," said Michael Sheldon, chief market strategist with Spencer Clarke. "The significant volatility over the last few days has really been caused by uncertainty over credit and financial markets along with the normal volatility that comes with earnings season."
The major averages took a brief trip above the flat line during the morning after the Census Bureau said new-home sales surprisingly rose last month, climbing to a rate of 770,000 annualized units from a downwardly revised 735,000 in August. New-home sales data for June and July were also revised lower by a combined 107,000.
"The economic fundamentals, though deteriorating, indicate the situation is salvageable," said Peter Morici, professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission.
"But the depth of structural problems in the mortgage market, and hence new-home market, indicate aggressive action is needed from the Federal Reserve Open Market Committee, when it meets next week, to help avert calamity," he added.
The Fed will convene for a two-day meeting starting Oct. 30, with most analysts expecting a 25-basis-point rate cut when the central bank announces its decision on Halloween.
Following the housing data, the Philadelphia Housing Sector Index jumped initially, but it finished 1% lower for the day. Similarly, several homebuilders relinquished gains, including
Most other sectors also finished in the red. The Philadelphia Semiconductor Sector Index dropped 2%, and the Amex Computer Hardware Index sank 3.2%. The Amex Airlines Index surrendered 2%, and the Dow Jones Transportation Average slipped 1.2%.
Transportation stocks were punished as crude futures jumped $3.36 to a record close of $90.46 at the New York Mercantile Exchange. At the same time, the surge in oil supported share prices in the energy group, with natural gas stocks among the best performers of the day.
Rumors about a huge writeoff by Dow component
pressured the blue-chip average. Shares pared losses, though, after
reported that the rumors were untrue. AIG fell $2.05, or 3.2%, to close at $61.79, clawing back from an 8% loss earlier.
New York Stock Exchange
3.93 billion shares changed hands, as decliners eked past advancers by a 17-to-16 margin. Volume on the Nasdaq reached 2.69 billion shares, with losers edging out winners 3 to 2.
Abysmal existing-home sales data, as well as disappointing earnings from
( MER) and
, hit stocks Wednesday, and the trend of sluggish earnings continued into the current session.
( MOT) said profits plunged from a year ago due to weak cell phone sales. Shares climbed 4% to $19.30, though, after it offered strong guidance for the fourth quarter.
also posted a sharply lower profit compared with a year ago, pressured by higher income tax rates. Excluding charges, the company earned 84 cents a share and fell short of estimates. Dow eased by 32 cents, or 0.7%, to $43.66.
Robert Pavlik, chief investment officer with Oaktree Asset Management, said that soft third-quarter results weren't the sole reason stocks have been struggling lately.
"We all knew going into this earnings season that results were going to be weak," he said. "What is driving the market here is weaker earnings guidance and cautious commentary going forward from some of the names that weren't initially seen as being affected."
Several other companies reported before the start of trading.
posted a 54% drop in third-quarter earnings from a year ago, falling in line with Thomson First Call consensus. The stock ended down $2.57, or 10.8%, to $21.28.
beat third-quarter estimates on both the top and bottom lines, but the company guided below fourth-quarter and full-year 2008 expectations. Shares shed $1.97, or 3.4%, to close at $55.61.
topped forecasts, while
swung to a third-quarter loss, falling short of analyst targets. Bristol-Myers advanced 3.3% to $29.36, and ImClone tacked on 0.8% to $44.04.
was another bright spot, jumping 12.6% to $37.13 after the company said that third-quarter earnings soared 73% from a year ago.
didn't report earnings until after trading ended, the company was already in the spotlight on word it would invest $240 million in the social-networking Web site Facebook.com. Shares rose 74 cents, or 2.4%, to $31.99.(
Following the close, Microsoft
blew past estimates .)
Outside of earnings, shares of
dropped 63% a day after state and federal authorities raided the Medicare HMO. The stock lost $72.50 to $42.67.
Away from equities, traders also had other economic data to digest in addition to the home sales. The Commerce Department said durable goods orders unexpectedly fell 1.7% last month, compared with expectations of a 1.5% rise. At the same time, the Labor Department said initial jobless claims were down 8,000 last week to 331,000, compared with forecasts for a decline to 320,000 claims.
Treasury prices slid late in the session. The 10-year note was down 8/32 in price, yielding 4.37%. The 30-year bond lost 14/32, yielding 4.67%.
Aside from oil, other commodity prices rallied. Gold was up $5.40 to $771 an ounce, and silver futures added 31 cents to $13.90 an ounce.
Overseas markets were mixed. In Asia, Hong Kong's Hang Seng rose 1.8% overnight, while Japan's Nikkei 225 was off 0.5%. In Europe, London's FTSE 100 and Germany's Xetra Dax were up 1.5% and 1.3%, respectively.