U.S. stocks falter on housing data

By Herbert Lash

NEW YORK (Reuters) - Investors tried to brush aside news of record-low U.S. housing data on Tuesday and anticipate a recovery in global economies but U.S. stocks faltered on concerns about the American consumer while oil rebounded on supply fears.

Oil prices rose to touch a six-month high over $60 a barrel as a flurry of U.S. refinery problems stoked fears of gasoline supplies leading into the peak summer driving season.

The euro gained as improving business sentiment in Germany spurred renewed optimism about the global economy, reducing the demand for safe-haven assets such as the U.S. dollar.

U.S. Treasury debt was mixed as investors warmed to riskier assets like stocks and as talk swirled that some U.S. banks were preparing to repay the government for bailout funds.

U.S. stocks were higher through much of the session but news that both new U.S. home starts and building permits fell in April to their lowest levels since records for the data were first collected almost 50 years ago helped erased those gains.

"The U.S. economy still has big issues, and while the rest of the world is still suffering, they may be better off than us," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

"That's why U.S.-centric companies underperformed last week and that's continuing into this week. All those that have outside exposure, whether it's commodities themselves, or emerging markets, they are performing better."

The Dow Jones industrial average <.DJI> closed down 29.23 points, or 0.34 percent, at 8,474.85 and the Standard & Poor's 500 Index <.SPX> fell 1.58 points, or 0.17 percent, at 908.13.

Technology shares bucked the wider trend in U.S. markets, rising modestly. The Nasdaq Composite Index <.IXIC> gained 2.18 points, or 0.13 percent, at 1,734.54.

A decline in financial shares was attributed to a new bill passed by the U.S. Senate on Tuesday to curb sudden credit card interest rate increases and hidden fees.

The S&P financial index <.GSPF> fell 2.6 percent, while JPMorgan Chase & Co <JPM.N> and American Express <AXP.N> were the Nos. 1 and 3 biggest drag on the Dow. JPMorgan fell 3.9 percent and American Express dropped 5.1 percent.

The second-biggest drag on the Dow as Home Depot Inc <HD.N>, which reported higher-than-expected quarterly earnings as massive cost cuts offset weak sales. Its shares fell as investors found the results disappointing in comparison with those of smaller rival Lowe's Cos Inc <LOW.N>.

Home Depot closed down 5.3 percent.

Shares of U.S. homebuilders initially fell, then rose and finally closed lower on the U.S. housing data. The Dow Jones home construction index <.DJUSHB> fell 0.75 percent.

European shares rose to their highest close in more than four months, driven by optimism about a financial sector recovery.

Also lifting regional shares was a closely-watched ZEW survey showing German investor sentiment rose to its highest level in nearly three years, underscoring various surveys showing improvement in investor morale.

"There is a very strong conviction now that recovery lies ahead and that earnings are going to come through and it is not going to budge until there is some real disappointing news flow," said Mike Lenhoff, strategist at Brewin Dolphin.

The FTSEurofirst 300 <.FTEU3> index of top European shares rose 1.2 percent to close at 872.09 points, its highest close since January 7.

U.S. crude settled 62 cents higher at $59.65 a barrel, after earlier reaching $60.48 a barrel, the highest level since November 11. London Brent rose 45 cents to settle at $58.92 a barrel.

The gains came after a fire struck a gasoline-making unit at a Flint Hills Resources' refinery in Corpus Christi, Texas, that processes 288,000 barrels of oil a day.

The fire followed an explosion on Sunday at Sunoco's <SUN.N> oil refinery in Marcus Hook, Pennsylvania, that forced the company to shut gasoline production and slow crude oil processing.

The benchmark 10-year U.S. Treasury note was down 6/32 in price to yield 3.25 percent. The 2-year U.S. Treasury note rose 2/32 to yield 0.89 percent.

The dollar fell against a basket of major currencies, with the U.S. Dollar Index <.DXY> off 0.53 percent at 82.10. Against the yen, the dollar was down 0.18 percent at 96.07.

The euro rose 0.58 percent at $1.3634.

U.S. gold futures ended higher after the previous session's losses on options-related buying and unexpectedly weaker U.S. housing data.

Gold for June delivery settled up $4.1 at $925.80 an ounce in New York.

Asian shares climbed to their highest level in seven months on fresh hopes the global recession is easing. The MSCI index of Asian stocks outside Japan <.MIAPJ0000PUS> rose 3 percent to its highest since October, while Japan's benchmark Nikkei average <.N225> closed up 2.8 percent.

(To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting. For the MacroScope Blog click on http://blogs.reuters.com/macroscope. For Hedge Fund Blog click on http://blogs.reuters.com/hedgehub)

Article Published: 19/05/2009