June 22nd, 2010
06:57 PM ET

Housing market report drives treasury gains, stock slump

A look at highlights from the day's business news:

Stocks slump in volatile trading 
Stocks slipped Tuesday, giving up earlier gains in a very choppy session amid a worse-than-expected existing home sales report and the continuing European debt crisis.

The Dow Jones industrial average fell 149 points, or 1.4 percent. The S&P 500 index lost 18 points, or 1.6 percent. The tech-fueled Nasdaq composite lost 27 points, or 1.2 percent.

Trading was volatile throughout Tuesday's session, with an early advance petering out after the release of the housing market report. But the tone turned decidedly negative in the last hour.

Oil company shares tumbled in the afternoon amid the continued fallout from the BP oil spill and a judge ruled to lift the six-month ban on deep water drilling instigated in the wake of the spill. BP, Transocean, Anadarko Petroleum, Hallliburton and Schlumberger were among the big decliners.

Worries that the economy could be heading into a so-called double-dip recession pummeled stocks for six weeks through early June, with the major indexes all losing close to 14 percent. Since then, stocks have bounced back about 6 percent but trading volume has been weak, reflecting both light summer activity and a lack of conviction on the part of buyers.

Oil prices dip toward $77

Oil prices retreated Tuesday as positive sentiment from the previous session faded while investors focused on a lackluster report on U.S. existing home sales.

Crude oil futures for July delivery, which expire Tuesday, dropped 61 cents, or 0.8 percent, to $77.21 a barrel. Oil futures for August delivery, which will be the active contract beginning Wednesday, fell 76 cents, or 1 percent, to $77.85 a barrel.

The four-week oil rally that pushed prices up more than 13 percent came to a halt as investors looked to weak data on the U.S. housing market.

Oil prices were also under pressure from a strong dollar, which rose
against the euro and the pound. Commodities, including oil, are priced in dollars, and a firmer greenback weighs on prices.

Dollar up on euro as China reaction fades

The dollar gained against the euro Tuesday as optimism about China's decision to let its currency float more freely faded and investors turned to the safety of the greenback.

The dollar rose 0.3 percent against the euro to $1.227, but fell 0.7 percent to ¥90.44 against the Japanese yen. The pound jumped 0.4 percent versus the dollar to $1.4809 after the U.K. announced its harshest budget cut in decades.

Over the weekend, China announced it would let its currency, the yuan, trade more freely. The news initially boosted stocks and pressured the dollar as investorsbecame more confident in the global economic recovery. But the dollar recovered losses midday Monday and rallied against the euro Tuesday as investors recognized that China's move would be gradual and wondered how a higher yuan would affect the economy.

Treasurys gain on housing data
Treasury prices rose Tuesday as investors looked for safe investments following a weaker-than-expected report on the housing market.

The benchmark 10-year note was up 6/32 to 102-11/32 and its yield fell to 3.22 percent from 3.24 percent. Bond prices and yields move in opposite directions. The 30-year bond gained 5/32 to 103-24/32 and its yield was 4.15 percent. The 2-year note was little changed at 100-1/32, yielding 0.73 percent.

Existing home sales fell to a seasonally adjusted annual unit rate of 5.66 million in May, the National Association of Realtors reported. That was down from a 5.77 million unit rate in April and short of forecasts for a rise to 6.1 million units. The report raised worries that the economy could be heading into a so-called double-dip recession, and added to ongoing concerns about the European debt crisis.

Meanwhile, the government is offering $40 billion worth of the securities in the first of three auctions this week. On Tuesday, 2-year notes were offered, the U.S. is scheduled to auction $38 billion in 5-year notes on Wednesday and $30 billion in 7-year notes on Thursday.

CNNMoney.com reporters Blake Ellis, Ben Rooney, Alexandra Twin and Hibah Yousuf contributed to this report.

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Filed under: China • Economy • Gulf Coast Oil Spill
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