Stocks sold off at the open this morning, with the Dow Jones Industrial Average sinking by some 70 points at its mid-morning nadir. This early setback was not unexpected by any means. After all, the market had surged forward yesterday, with the Dow gaining 214 points and the NASDAQ climbing 62 points on diminished fears from the beleaguered euro zone.
However, this morning, in addition to the obligatory profit taking in a market that was no longer oversold, investors were forced to grapple with some dispiriting news on the homebuilding front, with the report, issued an hour before the start of trading, that showed a larger-than-expected decline in May housing starts. Specifically, starts tumbled 10%, to an annualized rate of 593,000 units. Building permits, a leading indicator on the construction front, also fell back. The apparent cause of this setback was the April, 2010 expiration of the first-time homebuyer tax credit. Absent that $8,000 inducement, the reasoning goes, potential buyers will not be as aggressive. Hence, the pullback by builders. Of course, all of that is not such a bad thing given the large overhang of unsold homes still on the market.
Wall Street's early setback, though, was mitigated somewhat by two other reports, issued just 15 minutes before the 9:30 AM (EDT) stock market opening, in which the government reported that industrial production surged ahead last month, while capacity utilization rose smartly, as well. That data helped to reduce some of the angst caused by the aforementioned setback on the construction front.
Also influencing trading this morning was the fact that FedEx warned about higher costs and the potential for some margin pressure, while there were some new concerns surfacing about Spain's fiscal problems. FedEx (FDX) shares are off $1.75, to $81.26 as the noon hour passes along the East Coast. Other losers today include Boeing (BA) and Morgan Stanley (MS) shares. Winners today include 3M Companies (MMM) and Thoratec (THOR).
All told, the Dow is off about 25 points, while the NASDAQ and the S&P 500 Index are each off just slightly. Overall, the market looks poised to perhaps make a run to positive territory after lunch. Stay tuned.