Dow Gives Up 16-Week High as Housing Woes, Weak Earnings Weigh on Stocks

The Dow and U.S. stock market finished slightly lower on Tuesday, as concerns over housing and lackluster earnings offset supportive comments from Federal Reserve Chairman Jerome Powell, who further reiterated his dovish stance on monetary policy. The Fed’s stance on interest rates allowed investors to breathe easy following another lackluster report on housing from the Department of Commerce.

Stocks Falter Down the Stretch

Wall Street’s benchmark indexes reversed minor gains in the final hour of trading Tuesday. The Dow Jones Industrial Average fell 33.97 points, or 0.1%, to close at 2,6057.98.

The blue-chip index was down by as much as 125 points after Home Depot Inc. (HD) reported disappointing quarterly results.

The broad S&P 500 Index settled down 0.1% at 2,793.90. Seven of 11 primary sectors reported losses, with materials leading the declines. Gains were largely concentrated in information technology stocks.

Meanwhile, the technology-focused Nasdaq Composite Index declined 0.1% to close at 7,549.30.

Read more about where Wall Street might be headed: Does this Chart Spell Doom for the S&P 500 Index?

Housing Woes Stoke Recession Fears

December was another lackluster month on the housing front, as groundbreaking for new residential units plunged anew. The Department of Commerce said housing starts dropped 11.2% in December to a seasonally adjusted annual rate of 1.078 million units. Analysts in a median estimate had called for a decline of just 0.5%. The November increase was revised sharply lower to reflect gains of 0.5% compared with 3.2% previously.

Building permits, a proxy for future construction plans, nudged up 0.3% to a seasonally adjusted 1.326 million units, official data showed.

Just last month, the National Association of Relators (NAR) reported that existing home sales in December fell to three-year lows. Housing has faced strong headwinds ever since the Federal Reserve accelerated its rate hike cycle. Fed rates impact mortgage rates indirectly as banks pass on the higher cost of borrowing to their customers.

Housing is a critical component of the U.S. economy and declining affordability has made it tougher for first-time buyers to enter the market.

Fed Chairman Reiterates Stance on Monetary Policy

Federal Reserve Chairman Jerome Powell on Tuesday reiterated the central bank’s patient approach to monetary policy. The stance, which was adopted in December, will likely see the Fed refrain from hiking interest rates in 2019.

“With our policy rate in the range of neutral, with muted inflation pressures and with some of the downside risks we’ve talked about, this is a good time to be patient and watch and wait and see how the situation evolves,” Powell told lawmakers on the Senate Banking Committee Tuesday, according to The Wall Street Journal.

The Federal Open Market Committee (FOMC) will meet again March 19-20. The official policy statement will be accompanied by revised projections for GDP, unemployment and inflation. Officials will also give their best estimate on the long-term trajectory of the federal funds rate.

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