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Wall Street fluctuates on energy

May 29, 2009

 

 

by Tim Paradis
The Associated Press

Investors shuttled between worries about the housing industry and hopes that the economy might be stabilizing.

Stocks fluctuated in a narrow range Thursday, falling after a twin dose of disappointing housing news but also drawing support from crude oil’s advance to a six-month high above $64 a barrel. Investors saw a bigger appetite for oil, as well as a dip in weekly unemployment claims and an increase in sales of big-ticket manufactured goods, as reasons to believe the economy will start growing and lift demand for raw materials.

The government said sales of new homes edged up only 0.3 percent in April, less than analysts expected. A separate report showed that a record 12 percent of mortgage holders were behind or in foreclosure in the first quarter.

Volatility in interest rates also tugged at the market.

On Wednesday, stocks tumbled following a plunge in Treasury bond prices and a corresponding spike in interest rates. Investors grew fearful that higher borrowing costs would choke the economy’s recovery. The yield on the Treasury’s 10-year note — a key benchmark for home mortgages and other kinds of loans — reached its highest level since November. The note recovered some of those losses Thursday but then gave back some of its gains, leaving traders on edge.

Investors also looked for insights into the prospects for General Motors Corp., which said a committee of bondholders agreed to a sweetened deal to erase some of the automaker’s unsecured debt in exchange for stock. The agreement may not prevent GM from seeking bankruptcy court protection, but investors are eager for any signs that a reorganization would be orderly. GM shares rose 6 cents, or 5.2 percent, to $1.21.

"We still have headwinds ahead, in terms of the housing market going down," said Michael Sheldon, chief market strategist at RDM Financial Group. "And we don’t know how high the unemployment rate is going to peak."

In midday trading, the Dow Jones industrial average fell 12.35, or 0.2 percent, to 8,287.67. The broader Standard & Poor’s 500 index rose 2.11, or 0.2 percent, to 895.17, and the Nasdaq composite index fell 2.74, or 0.2 percent, to 1,728.34.

The yield on the 10-year Treasury note, which moves opposite its price, pulled back to 3.71 percent from 3.75 percent late Wednesday.

Light, sweet crude rose $1.10 to $64.55 a barrel on the New York Mercantile Exchange.

Energy stocks gained. Marathon Oil Corp. rose $1.26, or 4.3 percent, to $30.50, while XTO Energy Inc. rose $1.29, or 3.1 percent, to $42.46.

Investors are keenly focused on indicators for the housing market, which analysts say must find a bottom before the broader economy can recover. Home builder stocks fell after the reports on housing and as the prospect of higher interest rates stirred worries that already weak demand will worsen.

Toll Brothers Inc. fell 76 cents, or 4.2 percent, to $17.26, while Beazer Homes USA Inc. fell 16 cents, or 6.3 percent, to $2.41.

While many investors are betting the economy will rebound later this year, companies across various industries are still hurting.

Procter & Gamble fell 54 cents to $51.23 after the consumer products maker issued a disappointing profit forecast, while Costco Wholesale Corp. fell 96 cents, or 2 percent, to $47.87 after its most recent quarterly profit sank 29 percent.

In other trading, the Russell 2000 index of smaller companies fell 4.78, or 1 percent, to 485.08.

Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where volume came to 557.8 million shares, compared with 499.8 million shares traded at the same time Wednesday.

The dollar was mixed against other major currencies. Gold prices rose.

Overseas, Japan’s Nikkei stock average edged up 0.1 percent. In afternoon trading, Britain’s FTSE 100 fell 0.7 percent, Germany’s DAX index fell 1.4 percent, and France’s CAC-40 slid 0.8 percent.

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