U.S. stocks posted their steepest drop in two weeks after falling home prices and weaker consumer confidence deepened concern the housing crisis will snuff out economic growth.
All 16 homebuilders in Standard & Poor's indexes fell after Lennar Corp. said it will miss its profit goal and a private report showed home prices decreased for the first time in at least six years. Countrywide Financial Corp., the biggest U.S. mortgage lender, declined the most in the S&P 500 on speculation delinquencies among the riskiest borrowers will rise.
Mounting evidence the U.S. real estate market is deteriorating has sent lenders and companies reliant on consumer spending to the worst performance in the S&P 500 this year. The retreat in home prices follows a government report yesterday showing new-home sales slumped to the lowest in almost seven years.
``To the extent that housing prices go down or housing sales slow, that only exacerbates problems in the subprime sector and could ripple through the economy,'' said John Kattar, who oversees $1.8 billion as chief investment officer at Eastern Investment Advisors in Boston. ``Housing is viewed as key by a lot of investors.''
The S&P 500 slipped 8.89, or 0.6 percent, to 1428.61. The Dow Jones Industrial Average decreased 71.78, or 0.6 percent, to 12,397.29, leaving it with a 2007 loss of 0.5 percent. The Nasdaq Composite Index fell 18.20, or 0.7 percent, to 2437.43. All three benchmarks had their steepest drop since March 13.
Home values dropped 0.2 percent in January from a year earlier, according to the S&P/Case-Shiller index, a measure of home prices in 20 U.S. metropolitan areas. The decrease was the first since the group started the index in January 2001.
Confidence Drops
Concern about the spread of home foreclosures and rising fuel prices pushed consumer confidence from a five-year high. The Conference Board's index of consumer sentiment dropped to 107.2 this month from 111.2 in February. Consumer spending accounts for more than two-thirds of the economy.
In other markets, the dollar fell against the euro and yen, while 10-year U.S. Treasury note yields were the highest since June relative to those on two-year securities. Crude oil rose to a three-month high in New York.
More than 10 stocks declined for every three that rose on the New York Stock Exchange. Some 1.4 billion shares changed hands on the Big Board, 14 percent less than the three-month average.
Lennar, the nation's largest homebuilder by revenue, reported earnings plummeted 73 percent last quarter as demand waned. The company said it will likely miss its 2007 profit forecast as the normally stronger spring selling season had not materialized. Its shares fell 4 cents to $44.50.
Rival D.R. Horton Inc. tumbled 31 cents to $22.48 and Toll Brothers Inc. slumped 45 cents to $28.40.
`Negative Scenarios'
``The fact that existing home sales and new home sales were weaker than people thought has people concerned that the sub- prime problems are going to bleed over into prime,'' said Charles Smith, who oversees $1.1 billion as chief investment officer at Fort Pitt Capital Group Inc. in Pittsburgh. ``You can build all sorts of negative scenarios from there.''
As many as 2.4 million Americans may lose their homes because of the collapse of subprime lenders, while foreclosures will increase in coming months, the Center for Responsible Lending said in testimony to Congress today.
Among mortgage lenders, Countrywide sank $1.53, or 4.2 percent, to $34.71 and NovaStar Financial Inc. slipped 35 cents to $4.99. Citigroup Inc., the biggest U.S. bank, lost 48 cents to $51.06, while Wells Fargo & Co. retreated 28 cents to $34.40.
Retailers
Among retailers linked to the housing market, Home Depot Inc. slid 57 cents to $37.34. Lowe's Cos., the biggest home- improvement retailer after Home Depot, lost 40 cents to $31.74.
Ethan Allen Interiors Inc. dropped 58 cents to $34.92 after the furniture retailer predicted a third-quarter profit below analysts' estimates. Citing a ``challenging'' economic environment, the company said earnings this quarter will be as much as 56 cents a share. The average analyst estimate in a Bloomberg survey is 59 cents.
Shares of Wal-Mart Stores Inc. slid 35 cents to $47.49. The world's largest retailer said it hasn't contacted U.K. competition regulators about a possible bid for Sainsbury, Britain's third-biggest supermarket chain.
Wal-Mart is considering a possible bid for J Sainsbury Plc and has talked with regulators about its interest, the Independent, a U.K. newspaper, reported, without saying where the information came from.
Ingersoll-Rand
Ingersoll-Rand Co. had the second-biggest drop in the S&P 500. UBS AG cut shares of the maker of Bobcat backhoes to ``neutral'' from ``buy'' on concern a decline in home construction will hurt sales while higher prices for raw- materials increase costs. The shares slid $1.52, or 3.4 percent, to $43.81.
DuPont Co., the largest U.S. chemical maker by market value, led producers of raw materials to the steepest retreat among 10 industries. Soleil Securities cut its share-price and earnings estimates for DuPont on concern a slowdown in housing and auto manufacturing will hurt demand while rising energy prices increase expenses.
DuPont shares dropped $1.55, or 3 percent, to $49.81 for the biggest decline in the Dow average. Dow Chemical Co. slipped 37 cents to $46.71.
GameStop Corp. surged $3.19 to a record $31.16. The world's largest video-game retailer said earnings next year will rise to as much as $1.40 a share on sales of video games for new consoles such as Nintendo Co's Wii, sending shares to a record high. Analysts estimated $1.36, on average.
The Russell 2000 Index, a benchmark for companies with a median market value of $652 million, fell 0.8 percent to 802.36. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, declined 0.6 percent to 14,474.79. Based on its drop, the value of stocks decreased by $111.1 billion.
Citigroup Inc. (C US)
Countrywide Financial Corp. (CFC US)
D.R. Horton Inc. (DHI US)
Dow Chemical Co. (DOW US)
DuPont Co. (DD US)
Ethan Allen Interiors Inc. (ETH US)
GameStop Corp. (GME US)
Ingersoll-Rand Co. (IR US)
Lennar Corp. (LEN US)
Lowe's Cos. (LOW US)
NovaStar Financial Inc. (NFI US)
Toll Brothers Inc. (TOL US)
Wal-Mart Stores Inc. (WMT US)
Wells Fargo & Co. (WFC US)
source:www.bloomberg.com
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