A disappointing report on housing starts made investors nervous about the economy Tuesday and sent stocks lower even as profits at many companies exceed expectations.
Stocks fell from 2009 highs after the Commerce Department said home building rose less than expected in September, a discouraging signal for future construction activity.
The market will get another measure of the housing market’s health Friday with a report on existing home sales. After several months of encouraging data on housing, investors have become disappointed in recent weeks with signs that a recovery in home building and home sales is starting to falter, which could bode poorly for the broader economy.
A rebound in the dollar from a 14-month low against other major currencies also hurt stocks by driving down commodity prices and, in turn, hurting energy and materials companies.
The housing data and the stronger dollar overshadowed strong earnings reports from Apple Inc., Caterpillar Inc. and health insurer UnitedHealth Group Inc.
There was more trouble for stocks from a Labor Department report finding that energy prices pushed U.S. wholesale prices lower in September, leaving a larger-than-expected monthly drop in the producer price index. That report helped lift the bond market, however, which tends to rise on signs of muted inflation and slow economic growth.
But Schaeffer’s Investment Research analyst Todd Salamone said the market’s ability to avoid a big slide is an encouraging sign.
“We’ve got a report that’s disappointing and the bears haven’t really gained control here,” he said. “It’s a good excuse just to take a breather.”
According to preliminary calculations, the Dow Jones industrial average fell 50.71, or 0.5 percent, to 10,041.48.
The broader Standard & Poor’s 500 index fell 6.85, or 0.6 percent, to 1,091.06, and the Nasdaq composite index fell 12.85, or 0.6 percent, to 2,163.47.
Treasury prices rose, pushing their yields lower, after the drop in producer prices. Inflation is a worry for bond investors because rising prices can eat into returns. The yield on the 10-year Treasury note fell to 3.34 percent from 3.39 percent late Monday.
The dollar and gold rose. Crude oil lost ground for the first time in a week, falling 52 cents to settle at $79.09 a barrel on the New York Mercantile Exchange. Oil rose to $80.05 during the day, its highest level in a year.
The day’s slide came as investors navigate a busy week of corporate earnings reports for signals about the economy. Profits have topped expectations but many companies have relied on slashing costs to boost profits as they did in the first half of the year. That has some analysts worried.
Dan Cook, senior market analyst at IG Markets in Chicago, is concerned that companies aren’t bringing in more revenue. He noted that reducing costs by laying off workers adds to the problems facing the overall economy.
“We call it cost-cutting because that’s kind of the nice term, but in reality a lot of those are consumers,” he said.
Cook said companies won’t be able to keep coming up with earnings that top expectations if improved profits don’t translate to a stronger economy.
“Right now we’re on a divergent path,” he said, referring to earnings and the economy. “It’s only a matter of time before that has to catch up.”
Russell Croft, portfolio manager at Croft Leominster Investment Management in Baltimore, contends that for now, any improvement in profits are good.
“In these tough times any kind of earnings power that these companies are talking about whether it’s revenue growth or cost-cutting — we’re happy about it,” he said.
Apple reported much stronger profits after the markets closed on Monday, citing big gains in sales of iPhones and Mac computers. Texas Instruments’ results came in above the improved forecast the chip maker issued last month.
Apple closed up $8.90, or 4.7 percent, at $198.76, after trading at a 12-month high of $201.75. Texas Instruments rose 14 cents to $23.66.
Caterpillar rose $1.76, or 3 percent, to $59.61, while UnitedHealth Group jumped $1.04, or 4.2 percent, to $25.96.
Two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.2 billion shares compared with 1.1 billion Monday.
The Russell 2000 index of smaller companies fell 8.93, or 1.4 percent, to 613.41.
Overseas, Britain’s FTSE 100 fell 0.7 percent, Germany’s DAX index lost 0.7 percent and France’s CAC-40 fell 0.5 percent. Japan’s Nikkei stock average rose 1 percent.
NSE Begins Week On Negative Note, Loses N19.49bn
The Nigerian stock market began the week on a negative note as banking and consumer goods stocks, among others, triggered a N19.49bn loss.
At the end of trading on the floor of the Nigerian Exchange Limited , the NGX All-Share Index dropped by 0.09 per cent to end at 43,270.94 basis points, while the market capitalisation declined to N22.58tn.
Market activities were mixed as the total volume of shares traded decreased by 30.19 per cent while the value traded rose by 34.05 per cent.
A total of 213.13 million shares valued at N2.36bn were exchanged in 4,105 deals, compared to 305.32 million shares worth N3.58bn in 4,450 deals last Friday.
FCMB Group Plc topped the traded stocks in terms of volume, accounting for 27.43 per cent of the total volume of trades while Airtel Africa Plc emerged as the most traded stock by value, representing 28.81 per cent of the total value of trades on the exchange.
14 firms gained compared to 21 losers.
AIICO Insurance Plc was the biggest gainer for the day, topping the gainers’ chart with a price appreciation of 8.57 per cent to N0.76 per share.
It was followed by LivingTrust Mortgage Bank Plc with a rise of 7.95 per cent, ending the day at N0.95 per share.
Analysing by sectors, three of the five major indices closed lower, led by NGX Oil & Gas (-0.56 per cent), NGX Consumer Goods (-0.23 per cent) and NGX Banking (0.18 per cent).
But the insurance (0.82 per cent) and industrial goods (0.002 per cent) indices gained at the end of trading.
… Introduces TIES To Boost Business Loan
The Central Bank of Nigeria (CBN) has introduced the Tertiary Institutions Entrepreneurship Scheme (TIES), which provides undergraduates and graduates with a platform to access loans.
The TIES’ underlying aim is to provide access to capital for Nigerian undergraduates and graduates with innovative entrepreneurial and technological ideas from polytechnics and universities.
TIES intends to shift undergraduates and graduates away from white-collar job pursuits and towards a culture of entrepreneurship development for economic development and job creation.
In a national biennial entrepreneurship competition, the Developmental Component would be distributed in the form of awards to Nigerian polytechnics and universities.
The competition aims to increase undergraduates’ awareness and visibility of high-impact entrepreneurial/technological concepts, foster entrepreneurial talent hunts in Nigerian polytechnics and universities, and encourage commercially viable and transformative technologies.
Interested Nigerian polytechnics and universities shall apply to participate in the national biennial entrepreneurship competition on a dedicated online portal.
Outlining brief details of the project, potential impact and evidence of originality of project, CBN said it is an innovation for students entrepreneurs.
CITN Applauds FG, Tax Authorities On Fiscal Policy Decisions
The Chartered Institute of Taxation of Nigeria (CITN) has lauded the Federal Government and tax authorities on the giant strides made on fiscal policy decisions and tax administration measures initiated this year in the area of Finance Act 2021 and the introduction of TaxPromax solution.
President of the institute, Adesina Adedayo, who gave the commendation at the institute’s yearly award ceremony at the weekend in Lagos, assured the government and tax authorities of aligning with the measures and promised to provide professional thoughts and insights on ways through which they could achieve an efficient and effective Nigerian tax system.
Adedayo emphasised the need to address the database, adding that without knowing who the tax-payers are, there is no way they can take money from unknown tax-payers.
Database is the aspect we have been emphasising on as an institute and in doing this, there are so many of pockets of data we have. All the data must be harmonised to have a simple unique tax-payers identification number,” he said.
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