NEW YORK – Wall Street pulled back sharply yesterday as a lack of economic news left investors hesitant to buy stocks ahead of the Federal Reserve's decision on interest rates next week.
Falling commodity prices and some strength in the U.S. dollar eased the inflation picture, but weakness in oil-and metal-related stocks pulled the market lower. Investors also found little direction without any new economic data to feed speculation over whether the Fed will hike rates again at its two-day meeting June 28-29.
Brian Gendreau, investment strategist for ING Investment Management, said investors appeared confused about what was driving the market now that hopes for a soft landing – for example, a gentle rise in interest rates that would contain inflation but preserve the economy's momentum – were running dry.
“I think when you get swings like this back and forth, it's indicative of a wide divergence of opinions in the market,” Gendreau said, adding that he believes the market could see sharp moves in either direction but will ultimately continue drifting sideways until there is more clarity on interest rates.
Some stocks got a boost from news of a joint venture between Nokia and Siemens. But the market turned lower at midday after the National Association of Home Builders said its June index of new home sales dropped to its lowest point since April 1995.
The Dow tumbled 72.44, or 0.66 percent, to 10,942.11, after sliding as much as 107 points earlier. Last week, a two-day bounce broke nearly six weeks of heavy selling and carried the Dow 1.13 percent higher for the week.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 11.40, or 0.91 percent, to 1,240.14, and the Nasdaq composite index dropped 19.53, or 0.92 percent, to 2,110.42. The Russell 2000 index of smaller companies lost 12.31, or 1.78 percent, to 680.76.
Bonds extended last week's decline, with the yield on the 10-year Treasury note inching up to 5.14 percent from 5.12 percent late Friday. Short-term bond yields remained above long-term rates, signaling greater expectations of an economic slowdown.
Overseas markets continued showing some improvement as Wall Street leveled off from its recent retreat. Japan's Nikkei stock average slipped 0.13 percent; Britain's FTSE 100 gained 0.51 percent, Germany's DAX index rose 1.18 percent and France's CAC-40 was higher by 0.73 percent.
Gold prices declined to $570 per ounce.
Crude oil futures dipped despite persistent worries about a potential supply cutoff amid rising tension over Iran's nuclear arms program. A barrel of light crude slid 90 cents to settle at $68.98 on the New York Mercantile Exchange.
The sole piece of economic news yesterday came from the NAHB, which said June new home sales slid to 42 from 46 the previous month. Readings below 50 mean a greater proportion of homebuilders anticipate weak results.
Declining issues led advancers by 3 to 1 on the New York Stock Exchange.
