U.S. Stocks Pare Gains After Downbeat Home Sales

NEW YORK (MarketWatch) -- Stocks significantly pared their gains Friday, coming under pressure after sales of new U.S. homes fell more than expected in November, rekindling concerns about the U.S. economy and the housing crisis.

The Dow Jones Industrial Average was up 21 points, or 0.2%, at 13,381. Earlier, the Dow hit an intraday high of 13,451.38.

Of the Dow's 30 components, nine were in negative territory. Among the biggest gainers was Exxon Mobil Corp. , whose shares rose 1.2%, tracking strong gains in crude-oil futures.

The S&P 500 Index gained 5 points, or 0.4%, to 1,481 and the technology-laden Nasdaq Composite rose 9.68 points, or 0.4%, to 2,686.

The new home sales report was "the turning point and pushed it [the market] lower," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank. "The number was quite a bit weaker than expected."

Sales of new U.S. homes fell by 9% in November to a seasonally adjusted annual rate of 647,000, the Commerce Department reported Friday. On average, economists surveyed by MarketWatch were expecting new-home sales to drop to a seasonally adjusted annual rate of 710,000 in November.

"It points to the fact that we're having a housing recession," Fitzpatrick said. "We're going to see these types of numbers on the housing side that are quite negative. [However,] when you look at the broader picture, we're still looking at an economy that's growing at a slower rate, but still growing."

On the bright side, business activity in the Chicago region improved in December, according to a survey of corporate purchasing managers released on Friday. The Chicago purchasing-managers' index rose to 56.6% in December from 52.9% in November, according to media reports. Readings of more than 50% indicate that more companies were expanding than contracting.

On Thursday, U.S. stocks fell sharply after the assassination of Pakistan opposition leader Benazir Bhutto and a weaker-than-forecast rise in durable-goods orders, with the Dow Jones Industrial Average ending the session down nearly 200 points.

On the New York Stock Exchange, 190 million shares were traded, with advancers outpacing decliners 18 to 11.

On the Nasdaq, 263 million shares exchanged hands, with advancers outpacing decliners 15 to 11.

Stocks in focus

Shares of Warren Buffett's Berkshire Hathaway
gained 1.3% after the Wall Street Journal reported that the company is going to buy a reinsurance unit for $433 million from Holland's ING and is starting a bond insurer for municipal issuers.

The Journal also reported that some major banks, including Citigroup and HSBC Holdings , are considering selling off a range of various assets.

Citigroup could sell 80%-held Student Loan Corp. , its North American auto-lending unit, its 24% stake in Brazil credit card operation Redecard and the bank's Japanese consumer finance business, the newspaper reported.

HSBC may sell its auto-finance business, the report said. Separately, Swiss bank UBS said it will not proceed with the acquisition of Standard Chartered Bank's mutual-funds management business in India.

Meanwhile, Dubai World increased its stake in MGM Mirage to 6.5%, buying 5 million shares of the casino operator from billionaire Kirk Kerkorian at $84.25.

Shares of MSC Industrial dropped 5% after Bear Stearns downgraded the company to peer perform from outperform, citing concerns that the U.S. maintenance, repair and overhaul market will modestly slow in the next couple of months.

Other markets

Gold futures for February delivery rose $4.70 to stand lately at $836.50 an ounce, continuing to gain from safe-haven demand and dollar weakness.

"The market is going to keep a very close eye on what's happening in Pakistan," said Peter Cardillo, chief market economist at Avalon Partners. "The key will be what happens with the pice of gold and oil if there is any escalation of violence."

Crude-oil futures also gained, with the February contract rising 45 cents at $97.07 a barrel.

The dollar lost ground against most major counterparts. The dollar index, which tracks the greenback against a basket of other major currencies, fell 0.3% to 76.365.

Prices of Treasurys extended their gains, with the benchmark 10-year Treasury note rising 15/32 to 100 28/32 while its yield contracted to 4.143%.

By Polya Lesova