Initially investors were relieved to hear from the National Association of Realtors that existing home sales declined in May by only 0.3 percent to 5.99 million units. The tepid reading was expected, and indicated that the housing sector is still weak – the pace of existing home sales was the slowest in four years; housing inventories rose by 5 percent to the highest level since 1992; and the median home price fell for a record 10th consecutive month.
The data wasn’t enough to keep the stock market afloat, so when crude oil prices rose back above $69 a barrel on news of U.S. refinery outages, many investors chose to take money off the table. High energy prices could translate to accelerating inflation – which investors fear the Fed may use as a reason to raise interest rates later in the year. The Fed is scheduled to meet this Wednesday and Thursday.
Central bankers are widely expected to keep the benchmark rate steady at 5.25 percent Thursday, but Wall Street is unsure if the Fed will alter its stance on inflation, which could mean a rate hike or decrease later in the year.
The 10-year Treasury note’s yield fell to 5.08 percent from 5.14 percent late Friday failed to calm the stock market on Monday. Soaring yields have played a starring role in the stock market’s volatility this month, because higher rates can slow down corporate activity.
On Tuesday, investors will be closely reading the Conference Board’s June consumer confidence index and the Commerce Department’s report on May new homes sales. So far, despite the weak housing market, the economy appears to be on the rebound. But even if economic data keep coming in strong, analysts predict high volatility in the stock market ahead of second-quarter earnings season, which begins in earnest in mid-July.
The Dow Jones industrial average fell 8.21, or 0.06 percent, to 13,352.05, after rising more than 100 points earlier in the day. The Standard & Poor’s 500 index fell 4.82, or 0.32 percent, to 1,497.74, and the Nasdaq composite index lost 11.88, or 0.46 percent, to 2,577.08. The Russell 2000 index of smaller companies fell 7.29, or 0.87 percent, to 827.46.