Stocks Drop on Disappointing Housing Numbers

Disappointing housing numbers were the fuel for a sell off in stocks today.  The markets started the day off on a positive note, but those gains were quickly reversed at 10:00 AM when the National Association of Realtors reported that May sales of existing homes fell to an annual rate of 5.66 million from a revised 5.79 million sales in April. This was well below the consensus estimate of 6.12 million sales.  The lower than expected sales caused some to worry about "a double dip in housing," according to the chief investment officer at Harris Private Bank in Chicago.

Adding to the downward pressure was a warning from Standard & Poor's of higher loan losses at Spanish banks.  S&P joined Fitch, which had warned of problems at BNP Paribas, in cautioning investors about issues at banks in the Euro zone.

The end result was a drop in all of the major indices.  Only two of the Dow's 30 components, Merck and Johnson & Johnson, were able to book gains for the day.  Alcoa and Caterpillar were the biggest losers in the Dow for the day.  The index itself was down by 1.4 percent, closing at 10,294.  The S&P 500 was off by 1.6 percent to 1,095.  And the tech heavy Nasdaq dropped despite good news from Apple, falling 1.2 percent to 2,262.

One of the biggest concerns of traders was the S&P 500 dropping below its 200 day moving average.  According to the chief market strategist at BTIG LLC, that drop is "not a good signal."  Furthermore, he added, "that's not all, lack of volume is also negative. Investors won't be making big moves unless the economic data or earnings season provide a catalyst."

And the senior technical strategist at Schaeffer's Investment Research added "what has me concerned, though, is two straight days now where we've seen a big drop in the final few hours of trading."

In addition, according to the chief market strategist at Genworth Financial, there's concern the Fed will release a more pessimistic report on the economy in its statement that accompanies its interest rate announcement.  Given the constrained levels of credit and tame consumer spending, its possible that the market got ahead of itself, he warned.

We'll find out tomorrow.  It will be an interesting day of trading to be sure.

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