» » Stocks Struggle For Direction Amid Dismal Housing Starts – U.S. Commentary

Stocks Struggle For Direction Amid Dismal Housing Starts – U.S. Commentary

(RTTNews) – Stocks closed Wednesday’s session on a mixed note, as disappointing data on housing starts and an upbeat report on industrial production polarized trader sentiment on the day. The major averages ended little changed, near the roughly one-month closing highs set in the previous session.

The Dow rose by 4.69 points to 10,409.46, the Nasdaq inched up by 0.05 points to 2,305.93 and the S&P 500 drifted lower by 0.62 points to 1,114.61.

Equities slumped early after the Commerce Department said that new residential construction slid by more than expected in the month of May. Housing starts fell by 10.0 percent to an annual rate of 593,000 in May from the revised April estimate of 672,000.

Economists had expected starts to slip to an annual rate of 655,000 from the 659,000 originally reported for the previous month.

At the same time, building permits fell by 5.9 percent to an annual rate of 574,000 in May from the revised April rate of 606,000. The decrease surprised economists, who had expected building permits to rise to 631,000.

However, stocks bounced back as traders considered data from the Federal Reserve, which showed that industrial production rose 1.2 percent in May, beating forecasts for a pickup of 0.8 percent.

The Fed also said that the economy’s capacity utilization moved up to 74.7 percent from 73.7 in April, also topping expectations which pegged utilization at 74.4 percent for the month.

The markets also looked to the latest price indicators in the U.S. economy. The Labor Department reported that producer prices edged down by a lower than expected margin, while core prices rose slightly higher than projected by economists.

On the corporate front, BP plc (BP) was in the news again after the UK-based energy company agreed to a $20 billion escrow fund to meet the claims resulting from its oil spill in the Gulf of Mexico. The agreement came after a White House meeting between top company executives and President Barack Obama earlier today.

Further, BP’s board decided to suspend all dividend payments for the rest of the year.

Meanwhile, the outflow of oil from the well in the Gulf has increased substantially according to the latest data. Scientists led by Energy Secretary Steven Chu now estimate the well is releasing anywhere from 35,000 to 60,000 barrels of oil per day.

Sector News

Despite a relatively lackluster outing by the broader markets, gold stocks saw strong gains, driving the NYSE Arca Gold Bugs Index up by 1 percent. With the upward move, the index ended the day at a one-month closing high.

Utility, semiconductor and computer technology stocks also ended the day on the upside, while losses among housing, wireless and telecommunication stocks offset the aforementioned gains.

Notably, the Philadelphia Housing Sector Index fell by 1.6 percent, slipping off of a the nearly two-week closing high set in the previous session. The slide among housing stocks came following the day’s disheartening data on housing starts.

Dow Components

American Express (AXP) was the strongest percentage gainer in the Dow, advancing by 1.8 percent. The advance helped the stock to a monthly high.

Caterpillar (CAT) and 3M (MMM) also finished notably higher, rising by 1.5 percent and 1.4 percent, respectively. Caterpillar posted a one-month closing high, while 3M finished at its highest closing price in roughly three weeks.

On the other hand, losses in excess of 1 percent by Alcoa (AA), Wal-Mart (WMT), Procter & Gamble (PG) and Microsoft (MSFT) helped to limit the advance in the blue chip index.

Other Markets

Overseas, stock markets across the Asia-Pacific ended higher again on Wednesday. Japan’s benchmark Nikkei 225 Index rose by 1.8 percent, while India’s BSE 30 Index advanced by 0.3 percent. Honk Kong’s Hang Seng Index was closed for trading.

The major European markets saw modest gains. The French CAC 40 Index and the U.K.’s FTSE 100 Index both rose by 0.4 percent, while the German DAX Index gained 0.3 percent.

In the bond markets, treasuries saw moderate gains. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, closed at 3.282 percent, posting a loss of 2.8 basis points.

Looking Ahead

Thursday, customary weekly data on jobless claims will be in focus along with reports on consumer prices, leading economic indicators and Philadelphia area manufacturing activity.

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