U.S. Stocks Decline After Tentative Start And Home Sales Data

NEW YORK (MarketWatch) -- U.S. stocks tilted mostly lower Tuesday, retracing a portion of the prior day's record-setting gains, as fresh economic data cast the troubled housing market in a dismal, albeit anticipated, light.

"The fundamental news didn't warrant the rally. When we see corporate earnings, companies will acknowledge the economy is slowing down," said Peter Bookvar, equity strategist at Miller Tabak.

The Dow Jones Industrial Average fell 43.2 points to 14,045.4, with 16 of the blue-chip barometer's 30 components trading lower. Exxon Mobil Corp. fronted the Dow's losses, its stock off 1.9%.

General Motors Corp. led among Dow advancers, with its stock gaining 2.9% after it managed to post a slight September sales gain while rivals Ford Motor Co. and Toyota Motor Corp. tallied sales declines.

GM's better than expected results helped the market trim earlier losses, with flat-lining energy prices also offering some support, Bookvar said.

The S&P 500 declined 1.61 points to 1,545.43, led lower by heavy selling in commodities-related stocks, such as energy and mining stocks. The Nasdaq Composite climbed 2.3 points to 2,743.33.

Volume on the New York Stock Exchange topped 1 billion shares, and advancing issues edged decliners 9 to 7. Nearly 1.6 billion shares exchanged hands on the Nasdaq, and advancers outdid decliners 4 to 3.

Only up from here?

after yesterday's record run inspired copycat gains overseas, supported by M&A activity and lingering hopes that the financial system is putting past indiscretions behind it," said analysts at Action Economics.

The lack of steep selling on Wall Street suggests investors are increasingly hopeful the credit crunch is all but over, said Al Kugel, chief investment strategist with Atlantic Trust. .

Bookvar disagreed. "You don't have a multi-year credit bubble that is over in a couple of months; why the market thinks that is beyond me."

Wall Street registered a muted reaction to word from the National Association of Realtors that its pending home sales index fell 6.5% in August, marking the lowest level since its inception in 2001. .

The housing market is in for an "extended period of real softness," said Joel Naroff, chief economist at Commerce Bank. .

Shares of major publicly traded U.S. residential builders climbed for a second day as investors bet the stocks had bottomed out after months of freefall.

Airline shares were among those adding to Monday's gains, with the sector advancing as the price of oil fell, with crude for November delivery falling 19 cents to close at $80.05 a barrel. .

Continental Airlines Inc. gained 4.5% after its late Monday report of rising traffic in September from a year ago.

Wall Street rallied Monday, pushing the Dow to a record close as the disclosure of sizable write-downs by Citigroup Inc. bolstered thinking that investors now have a better handle on the extent of the damage stemming from riskier subprime home loans.

On Tuesday, Citigroup disclosed its plan to buy the 32% of Japanese brokerage Nikko Cordial Corp. that it does not already own for about $4.6 billion in stock.

Corporate news

Ford Motor Co. posted a 20.5% retreat in September U.S. auto sales, a decline even worst than many analysts expected. The auto maker's stock climbed 4%.

American Honda Motor Co., a division of Honda Motor Co. , reported a 9.4% hike in September U.S. auto sales from a year ago.

Shares of Sallie Mae were up nearly 0.5% after the investor group in negotiations to buy the student lender revised its bid, offering as much as 20% less than its original offer.

In a deal that highlights the strength of Canada's currency against the U.S. dollar, Canadian banking giant TD Bank Financial Group said it would acquire Commerce Bancorp Inc. , Cherry Hill, N.J., for $8.5 billion in stock and cash.
Other activity on the merger front had the Nasdaq Stock Market Inc. agreeing to acquire the Boston Stock Exchange for about $61 million.

Shares of Pepsi Bottling Group Inc. added 2%. The company reported that third-quarter profit was up over 25%, and revised higher its full-year outlook.

Palm Inc. shares slumped 1.8% after the wireless device maker reported late Monday a first-quarter loss and issued a disappointing forecast for the current period. .

CBS Corp. shares slid 0.8% after Deutsche Bank Securities cut its rating to a hold from buy. .

Other action

The dollar moved higher, with the greenback drifting up for a second session against its major counterparts. .

Treasury prices turned higher, with the benchmark 10-year note recently up 5/32 to 101 24/32 as its yield fell to 4.528%. .

On the New York Mercantile Exchange, gold futures tumbled as traders rushed to lock in gains, with gold for December delivery falling $17.80, or 2.4%, to close at $730.80 an ounce. .

Overseas, markets in Asia climbed to record levels, playing off Monday's Wall Street advance.

In Europe, bourses trimmed their gains. And London's top index fell into the red. .

By Kate Gibson