Commodity prices put the heat on stocks Wednesday. Metals prices tumbled on signs of softer demand while oil rallied on fears of tighter supplies. There's a bit of a contradiction, because slowing economies that use less copper, nickel and aluminum ought to use less oil, too. But with the sheer number of scenarios of diminished crude supplies worrying oil traders, stocks imagined a world where growth stalled and oil was still dear. After trading as high as 10127.17 early on, the Dow Jones Industrial Average reversed to closed down 0.7% at 10,002.33. The S&P 500 lost 0.7% to 1113.64 vs. its intraday best of 1127.02. And the Nasdaq Composite, which traded as high as 1948.01 amid a positive reaction to earnings from tech bellwethers Intel ( INTC) and Yahoo! ( YHOO), lost 0.2% to 1920.53. After hours Wednesday, Apple Computer ( AAPL) reported much stronger-than-expected results and was recently up 4.4%, but Sandisk ( SNDK) was tumbling 18% after reporting disappointing earnings.
Meanwhile, Chinese Premier Wen Jiabao spoke in Beijing at a meeting on the country's natural resources strategy. High consumption projects could be controlled, supplies could be regulated and conservation could be promoted, the premier said, according to an account in a government newspaper. Still, there are signs that China's economy isn't slowing much. BHP Billiton ( BHP), the world's biggest mining company, said its outlook for China remained positive. And China's finance minister said growth of 9% for 2004 would be acceptable, throwing cold water on the notion that the country's "administrative" moves to date really have slowed the economy there much. For at least one day, there wasn't room for debate, and every stock related to basic materials lost. Phelps Dodge ( PD) lost 9%, U.S. Steel ( X) lost 5%, Alcoa ( AA) fell 4% and BHP Billiton lost 5%.
Pulte Homes ( PHM) started the sector on its current tumble when it announced on Oct. 4 a spike in cancellations and price-cutting in Las Vegas. MDC dropped 3% Wednesday and Pulte lost 2%, while Centex ( CTX) lost 3% and Toll Brothers ( TOL) fell 3%. The Philadelphia Stock Exchange's housing stock index lost 2% to 380.65 and is sitting 7% below where it was before Pulte's shocker. Looking further into MDC's earnings release showed that the slowdown extends beyond Las Vegas. New orders declined 29% in California, 36% in Nevada, 37% in Maryland, 9% in Virginia and 1% in Colorado. Those five states accounted for two-thirds of all of the company's new orders in the third quarter of 2003 and 53% for the quarter this year. Orders in Arizona gained 26% and doubled in Texas and almost doubled in Utah. Another piece of bad news for builders came in the morning papers Tuesday and Wednesday. Recall that the fading demand some homebuilders experienced in Las Vegas was presaged by a piece in the local paper about troubles in that real estate market. In the past 48 hours, the Dallas Morning News, Los Angeles Times, San Diego Union-Tribune and Newsday on Long Island in New York all carried stories about weakness in home sales. Reporter Steve Brown in the Dallas paper wrote that third-quarter existing homes sales declined 2% and the median price declined 3%. Further, the supply of existing homes climbed 4% at the end of September. All appeared rosy with new homes -- sort of. Sales were up 7.5% in the quarter. Apparently, there was some discounting. "What the builders offer is unbelievable," residential agent Barry Hoffer of Prudential Texas Properties was quoted as saying by the paper. "They pay closing costs, give a decorating allowance, and sometimes they'll cut their price if you can close in 30 days. It's a wonderful time to buy new construction." Homebuilders started a record 13,000 new homes during the quarter at the same time cancellations of prior new home orders spiked up to 40% from 30% to 35% in the past, the paper said. Sounds like trouble.