U.S. Stocks Close Lower Under Weight Of Unsold Homes

NEW YORK (MarketWatch) -- Stocks closed lower Monday amid data indicating the count of unsold homes hit a 16-year high in July and word Dow component Home Depot cut the price of its wholesale-supply unit, signaling a harsher financing climate.

"There are a lot of homes in the hands of speculators that need to be sold. That means the revulsion stage of the housing bubble has a long way to go," said Hugh Johnson, chairman of Johnson Illington Advisors.

"All is not right yet with the housing market. It's going to be at least three to six months before we can talk about a bottom," said Paul Nolte, director of investments at Hinsdale Associates. "It's not going to impact the market every day, but reacting to the news when it comes out."

The Dow Jones Industrial Average was down 56.7 points at 13,322.1, with 21 of its 30 components trading lower. General Motors Corp. led the losses, with its stock off 2.4%.

The Dow's advancing stocks included Honeywell International Inc. , which gained 2%, along with Home Depot Inc., which climbed 1.6% in the wake of a Wall Street Journal report that the retailer had agreed to sell HD Supply for $8.5 billion, or about 18% less than the price initially reached only two months ago.

Shares of Altria Group Inc. , also a Dow industrials component, climbed 1.3% amid rising speculation that it might announce a spin-off of its international business after a meeting of the tobacco titan's board of directors this week.

The S&P 500 declined 12.6 points to 1,466.79 and the tech-heavy Nasdaq Composite lost 15.44 points to 2,561.25.

Volume at the New York Stock Exchange totaled more than 1.1 billion shares, with declining stocks topping advancers 3 to 1. At the Nasdaq, volume came to nearly 1.4 billion shares, and decliners beat advancing stocks 9 to 5.

For sale

In economic data, the National Association of Realtors reported inventories of unsold single-family homes climbed 2.2% to 3.85 million in July, sending the inventory in relation to sales to the highest level in 16 years.

"There's nothing redeeming" in the NAR's report, Mark Zandi, chief economist at Moody's Economy.com told MarketWatch's John Wordock.

Nacco Industries Inc. cited volatility in the capital markets as the reason it has decided not to spin off its Hamilton Beach/Protor-Silex business. Its shares slid 2.9%.

Also, Chicago Bridge & Iron Co. has agreed to buy Lummus Global from engineering-services giant ABB for $950 million.

And in a deal announced late Sunday, United States Steel Corp. is buying Canada's Stelco Inc. for C$38.50 a share, or C$1.1 billion.

Elsewhere on the M&A front, Taiwan's Acer Inc. has agreed to buy Gateway Inc. for $710 million, or $1.90 a share -- a 57% premium to Friday's closing price. Share of Gateway, the fourth-largest personal-computer maker in the U.S., soared more than 50%.

Other technology stocks did not fare so well, with actively traded decliners including Apple Inc. , which fell 2.2%, and EMC Corp. , down 1.7%.

Shares of Countrywide Financial fell 4.8% after Lehman Brothers reduced its earnings estimate for the nation's largest mortgage lender, while Exxon Mobil Corp., the globe's biggest oil producer, fell 0.7%.

Other markets

Crude-oil futures gained, with the contract for October delivery ending up 88 cents at $71.97 a barrel on the New York Mercantile Exchange.

The dollar was mixed, falling 0.4% against the yen at 115.95 yen. The euro was done 0.3% at $1.3645, while the British pound was up 0.05% at $2.0149.

Treasury prices were higher, sending yields down, with the benchmark 10-year note up 6/32 at 101 7/32, its yield at 4.60%.

Gold futures finished a lackluster trading session with a slight loss, with the contract for December delivery falling $1.30 to close at $676.20 an ounce on the NYME.

Other continents

Overseas, Hon Kong was the big winner as Asian stocks made broad gains overnight.

In Europe, the French CAC 40 index added 0.8% with more modest gains in Frankfurt. U.K. markets were closed for a bank holiday.

On Friday, U.S. stocks ended sharply higher after an unexpected rise in new-home sales helped drive hopes that the worst of the subprime mess could be over, with the Dow gaining 143 points and the S&P 500 adding 16.9.

By Kate Gibson