Stocks sink as economic fears persist

Investors show caution ahead of key reports this week. A gauge of pending home sales rises more than expected. Factory orders decline. Goldman cuts its rating on Microsoft.

By TheStreet Staff Oct 4, 2010 7:52AM

TheStreetBy Melinda Peer, TheStreet

 

Updated at 1:49 p.m. ET

 

Stocks were falling Monday after a better-than-expected increase in pending home sales failed to allay investors' concerns about the economy.

 

At 1:49 p.m. ET, the Dow Jones Industrial Average ($INDU) was down by 98 points, or 0.9%, at 10,732. The S&P 500 ($INX) was down by 12 points, or 1%, at 1,135. The Nasdaq ($COMPX) was falling by 31 points, or 1.3%, to 2,340.

 

Investors have been cautious ahead of several key economic reports this week, including data on employment in September. The job market has remained sluggish despite the growing economy.

 

Microsoft (MSFT) was the Dow's biggest laggard as its shares slumped 2% to $23.89 on a downgrade from Goldman Sachs (GS) to "neutral." Intel (INTC), Alcoa (AA) and General Electric (GE) were also pressuring the Dow in early-afternoon trading. Alcoa will kick off earnings season Thursday, the first Dow component to report third-quarter results. (Microsoft owns and publishes MSN Money.)

 

The National Association of Realtors' gauge of pending home sales jumped 4.3% to 82.3 in August from a revised 78.9 in July. Economists had estimated that the sales index would rise 1%, slowing from July's 4.5%, according to Briefing.com.

Keith Hembre, the chief investment strategist at First American Funds, said pending-home-sales figures tend to jump from month to month but general housing indicators continue to point to a market that is neither deteriorating nor showing much improvement.

 

Hembre says investors may be preparing for the Institute for Supply Management's nonmanufacturing index for September on Tuesday, in addition to Friday's jobs report.

 

Factory orders fell 0.5%, as expected, in August after rising 0.4% in July.

 

In company news, Sanofi-Aventis (SNY) launched a $18.5 billion hostile takeover bid for biotech company Genzyme (GENZ). Sanofi's American depositary receipts were rising 0.1% to $33.16, while Genzyme stock was up 0.3% to $71.11.

 

Sara Lee's (SLE) stock surged after the food company reportedly rejected a buyout bid by private-equity firm KKR (KKR). Sara Lee shares rose 7.7% to $14.47.

 

Cisco (CSCO) apparently plans to expand its consumer products strategy by bringing its high-end videoconferencing technology into the home, according to a Wall Street Journal report. The stock was declining 1.7% to $21.54.

 

The New York Times (NYT) plans to repay its $250 million loan from Mexican billionaire Carlos Slim by 2012 -- three years ahead of schedule. The stock was dropping 1.3% to $7.75.

 

Visa (V) and MasterCard (MA) are reportedly close to settling allegations of antitrust violations with the U.S. Justice Department, according to The Wall Street Journal. Visa shares were up 0.8% at $73.89, while MasterCard was down 1% at $222.51.

 

UBS (UBS) and Credit Suisse (CS) are being required to hold more capital than their international peers under new rules from the Swiss government. Shares of UBS were advancing 0.6% to $17.13, while Credit Suisse's stock was shedding 0.1% to $43.19.

 

American International Group (AIG) is trying to sell its mutual fund business in India. According to a report in India's Mint newspaper, AIG is valuing the unit at 4% to 5% of the 10.2 billion rupees ($230 million) in assets it has under management. At least four asset management companies have shown interest, the report said. AIG shares were little changed at $38.86.

 

The November crude oil contract was adding 3 cents at $81.61 a barrel.

 

The December gold contract, the most actively traded gold future, was losing $2.40 at $1,315.40 an ounce.

 

The dollar was trading higher against a basket of currencies, with the dollar index up by 0.4%. The benchmark 10-year Treasury note strengthened 9/32, diluting the yield to 2.481%.

 

The FTSE in London was losing 0.7%, and the DAX in Frankfurt was falling 1.2%. Hong Kong's Hang Seng jumped 1.7%, while Japan's Nikkei slipped 0.3%.

 

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