Stocks fluctuate as drop in home sales overshadows upbeat earnings from Apple, eBay, Raytheon

Drop in home sales tugs at stock market

NEW YORK — An unexpectedly large drop in home sales dashed hopes that the economy is patching one its biggest holes. Stocks teetered back and forth Thursday after a 3 percent drop in sales of existing homes in March stirred worries that housing will remain a drag on the economy. Slumping home demand is also hurting banks by making them cautious about extending new loans.

The grim housing report overshadowed some stronger-than-expected earnings from such companies as Apple Inc., eBay Inc. and PNC Financial Services Group, and led many investors to focus on the weaker ones. Steelmaker Nucor Corp. suffered its first loss ever, and a slump in business at shipping giant UPS Inc. suggested more weakness in the economy.

“We’re in the middle of spring and people are trading stocks on hope,” said Charles Ortel, managing director at Newport Value Partners in New York. “But the harder data that are appearing are very negative.”

In late afternoon trading, the Dow Jones industrial average rose 0.72, or less than 0.1 percent, to 7,887.28.

Broader stock indicators were mixed. The Standard & Poor’s 500 index rose 0.08, or less than 0.1 percent, to 843.63, and the Nasdaq composite index fell 7.50, or 0.5 percent, to 1,638.62.

The fluctuations came a day after stocks ended mostly lower on worries about the health of banks and concerns that the market has risen too fast since logging 12-year lows more than six weeks ago. The Dow is up about 20 percent since then.

Economic data on Thursday was weak. The National Association of Realtors reported that home sales fell 3 percent to an annual rate of 4.57 million in March from a revised pace of 4.71 million units in February. And the Labor Department reported a rise in new unemployment claims last week that was more than expected. The number of workers continuing to file claims for jobless benefits topped 6.13 million — the 12th straight weekly record.

Ken Winans, president and chief executive of Winans International in Novato, Calif., said investors have been too quick to predict the end of the recession given difficulties like the glut of available homes and mounting unemployment. A sense that the economy was starting to stabilize touched off the rally that began last month.

“The stars are not all going to align,” Winans said of economic readings. “Bottoms take time.”

Traders have been taking some comfort from companies that have so far navigated the recession with success.

Apple rose $3.29, or 2.7 percent, to $124.80, while eBay rose $1.93, or 13.1 percent, to $16.71 after good results at both companies raised expectations that some consumers will continue to spend on gadgets and other goods.

Raytheon rose $2.41, or 5.8 percent, to $43.71 after raising its full-year earnings forecast and seeing stronger sales of missiles, radars and defense electronics.

PNC Financial Services Group Inc. rose $2.28, or 6 percent, to $40.34 after reporting a surprising 22 percent rise in first-quarter profit, boosted by its acquisition of National City Corp. and lower funding costs.

Most financial stocks rose, thanks largely to PNC’s earnings. But investors remain cautious about betting on banks as they await details on the government’s “stress tests” of banks. Regulators are examining banks to determine which banks can survive a severe economic downturn. The Federal Reserve is expected to explain its methodology for the tests on Friday and release results on May 4.

Another obstacle for the stock market: Many earnings reports are still showing severe economic strain.

UPS fell $1.79, or 3.3 percent, to $52.96 after earnings fell more than 55 percent as fewer people sent packages and used premium services like next-day air. UPS also warned second-quarter results will fall short of expectations.

And Nucor Corp., the largest U.S. steel producer, posted its first loss ever due to tumbling demand, and forecast an even wider loss for the second quarter. Nucor shares fell $4.79, or 11 percent, to $39.28.

General Motors Corp. fell 8 cents, or 4.7 percent, to $1.61 after the automaker said it plans to close 13 plants.

In other trading Thursday, the Russell 2000 index of smaller companies fell 8.49, or 1.8 percent, to 462.22.

About eight stocks rose for every one seven that fell on the New York Stock Exchange, where volume came to 1.14 billion shares.

Bond prices rose, pushing the yield on the benchmark 10-year Treasury note down to 2.93 percent from 2.94 percent late Wednesday.

Light, sweet crude rose 77 cents to $49.62 per barrel on the New York Mercantile Exchange.

The dollar was mixed against other major currencies, while gold prices rose.

Overseas, Britain’s FTSE 100 fell 0.3 percent, Germany’s DAX index fell 1.2 percent, and France’s CAC-40 fell 0.6 percent. Japan’s Nikkei stock average rose 0.22 percent.