Wall Street experienced a choppy session after big retailers lowered their sales forecasts and as house prices fell at their sharpest pace for 16 years.
The market rebounded from early lows after existing home sales data declined at a slightly lower rate than anticipated. But athough technology stocks continued to surge, the gains failed to lift the broader market.
The S&P 500 was flat at 1,517.22 after falling as low as 1,507.13. The Dow Jones Industrial Average closed slightly higher, up 0.1 per cent at 13,778.65.
The Nasdaq again outperformed the other main indices, as investors continued to favour tech-related stocks. The Nasdaq Composite index closed 0.6 per cent higher at 2,683.45, as Apple and Expedia hit all-time highs.
Sentiment was bruised in early trade after disappointing sales forecasts from two big retailers and as new data showed consumer confidence had fallen close to a two-year low. Some early losses were pared as investors reasoned that much of the bad news had already been built in to stock values.
Jim Paulsen, chief investment strategist at Wells Capital Management, said: “It’s not at all surprising that existing home sales were down. It’s not even all that surprising that consumer confidence was off.
“If anything, the most damaging thing is the anecdotal retail evidence.”
Retail stocks suffered a torrid day after Target lowered its September store sales to an expected rise of 1.5 per cent to 2.5 per cent, down from a range of 4 per cent to 6 per cent. Its shares closed 4.6 per cent lower at $61.35.
The S&P retail index ended the day 2.7 per cent lower at 470.56 but is still trading 4.6 per cent above the low it hit when the credit squeeze began in August. The S&P consumer discretionary index lost 1.2 per cent to 287.36.
Lowe’s, the home improvement chain, fell 6.7 per cent to $28.51, after it said slower sales would peg earnings at the low end or slightly below its prior guidance for the year. New consumer data weighed on retail stocks. The US Conference Board index of consumer confidence fell to 99.8 in August versus 105.6 in July, its lowest level since November 2005.
Georges Yared, chief investment officer at Yared Investment Research, said: “Are we signalling the bottom in terms of consumer confidence? I think we are close but not quite there yet. The Fed is watching the actions of consumers like a hawk.”
Other retail stocks suffered on weaker sentiment for the sector.
Home Depot declined 2.4 per cent lower to $33.08, while Wal-Mart slipped 1.8 per cent to $43.16. Macy’s shed 3.2 per cent to $31.91.
Housing-related stocks were also in focus after a string of new data.
Existing home sales for August declined 4.3 per cent to 5.5m, their lowest level since August 2002. However, the result was slightly better than the 5.44m sales economists had predicted.
The backlog of unsold homes climbed 0.4 per cent to 4.58m, the biggest backlog since records began in 1999. Existing home sales have declined in each of the past five months.
Lennar posted a loss of $513.9m in the third quarter, versus a profit of $206.7m a year earlier. The loss was well beyond analyst expectations and shares in the homebuilder were down 7.7 per cent.
The Case-Shiller home price index for July revealed a 4.5 per cent fall in its 10-city composite. The 20-city composite declined 3.9 per cent over the 12 months through July.
Economists at Lehman Brothers said: “The housing market has indisputably taken a turn for the worse, largely due to tighter lending standards and higher borrowing costs. In an ugly feedback loop, buyer sentiment has fallen, putting even more downward pressure on sales and home prices.
“We expect prices to ultimately fall more in this cycle than in the early 1990s.”
The S&P homebuilders index fell 2.2 per cent to 419.58, while the SPDR homebuilders exchange-traded fund lost 2.6 per cent to $21.52.
DR Horton shed 2.1 per cent to $13.28 while KB Home, which reports third- quarter earnings on Thursday, slipped 2.5 per cent to $25.09.
Energy stocks were also lower as oil prices fell below $80 in New York and after Saudi Arabia’s oil minister said energy markets are “in turmoil”. The S&P energy index was down 0.9 per cent at 575.82 as US crude future prices shed $1.42 to $79.53 a barrel.