Stocks slump on interest rates

The housing market is showing some signs of life -- thanks to foreclosure sales. But stocks were tumbling because of rising interest rates and oil prices.

Crude oil briefly topped $63 a barrel, and the yield on the 10-year Treasury note hit 3.695%, up from 3.493% on Tuesday. The yield is up nearly 20% this month alone.

At 3:30 p.m. ET, the Dow Jones industrials ($INDU) were down 157 points, or 1.9%, to 8,317. The Standard & Poor's 500 Index ($INX) was off 15 points, or 1.7%, to 895. The Nasdaq Composite Index ($COMPX) was off 17 points, 1%, to 1,734.

For those hoping for a continuation of Tuesday's rally, today has to be a disappointment. And the home sales report disappointed anyone looking for a turnaround, since it suggested a housing recovery is going to be slow at best.

Meanwhile, the uncertainty created by a probable bankruptcy filing by General Motors (GM, news, msgs), perhaps next week, is casting a pall on the market.

GM announced this morning that bond holders rejected the terms of an offer to convert $27 billion in debt into GM common stock, preferring to take their chances in bankruptcy court.

What life there was in the market today was in energy -- the beneficiary of higher energy prices -- and technology.

Technology stocks were relatively strong, especially semiconductor stocks and stocks of key players such as Apple (AAPL, news, msgs), Research In Motion (RIMM, news, msgs) and Google (GOOG, news, msgs).

Home prices still falling

Existing-home sales rose 2.9% in April from March, to a seasonally adjusted annual rate of 4.68 million units, according to the National Association of Realtors, better than the 4.67 million sales economists expected.

But sales were still 3.5% lower than a year ago. Moreover, inventories of previously owned homes surged 8.8% in April to 3.97 million, representing a 10.2-month supply at the current sales pace. That's up from a 9.6-month supply in March.

About 45% of last month's existing-home sales were sales of foreclosed homes and short sales -- homes sold for prices below the existing mortgage balances. First-time buyers and speculators are bidding for the homes.

Sales of high-end homes -- $750,000 and up -- are down 50% from two years ago, and the inventory of unsold homes represents a 40-month supply, up from 27 months a year ago and 19 months in 2007.

The problem: Move-up buyers can't sell their homes.

The median sale price for an existing home last month was $170,200, down 15.4% from $201,300 in April 2008.

Resales of single-family homes increased 2.5% in April to an annual rate of 4.18 million, while sales of condos and co-ops rose 6.4% to a 500,000 rate.

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"It's a nonregular market in terms of so much distressed sales activity," Lawrence Yun, the chief economist of the NAR, said in a press briefing. Lower-priced properties helped spark the sales, but there is "very little" activity at higher price points, Yun said.

The report follows Tuesday's S&P/Case-Shiller report that showed a 19.1% plunge in first-quarter home prices.

Meanwhile, Federal Housing Finance Agency reported this morning that U.S. home prices fell 1.1% in March, and 7.3% in the past year. In the first quarter of this year, home prices fell 0.5%, the agency also reported.

In related news, mortgage applications fell a seasonally adjusted 14.2% last week from the same week last year, the Mortgage Bankers Association said this morning. Rates on 30-year fixed mortgages averaged 4.81% last week, up from 4.69% the week before. Applications for refinancing fell 18.9%, but applications for home mortgages rose a seasonally adjusted 1% last week, the group said.