Strong Data Leave Stocks Unfazed

PETER A. MCKAY GEOFFREY ROGOW

Stocks inched higher Wednesday as a report of rising new home sales and better-than-expected durable-goods orders failed to excite investors.

After wavering between slight gains and losses for much of the day, the Dow Jones Industrial Average added 4.23 points, less than 0.1%, to 9543.52, eking out a seventh straight day of gains. Decliners were led by industrials, such as 3M, Caterpillar and General Electric, and financials, including J.P. Morgan Chase. Both sectors had been at the forefront of the Dow's recent winning streak.

The Nasdaq Composite Index was up less than one point at 2024.43. The S&P also gained just under a point to 1028.12, hurt by a 1% decline in its industrial sector. Its materials sector was off 0.2%.

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Strategist Jim Paulsen, of Wells Capital Management in Minneapolis, and other market veterans note trading volume remained generally light on the session, as has regularly been the case recently. That has caused traders to take the market's sharp gains, including recent closes in major indexes at their highest levels since the fall, with a grain of salt.

"I feel like the gains we've seen are mostly because people stopped selling, but we have yet to see a rally driven by a great influx of buyers," said Mr. Paulsen. "I think that's because people are still shellshocked a little bit. If we'd had a more normal market low at, say, 900 [on the S&P 500] rather than sub-700, sentiment might be a little different."

On Wednesday, NYSE Composite volume was about 4.3 billion shares, compared with about 5.9 billion on average for 2009. There were 1,289 advancers versus 1,672 decliners on the exchange, a discrepancy some cited as reason the Dow may break its current winning streak at Wednesday's close.

Stocks opened lower, but briefly tipped into positive territory as the Commerce Department reported that sales of new homes climbed by 9.6% in July, a much stronger increase than analysts expected. Another closely watched measure -- the inventory of unsold homes -- fell to 7.5 months of supply, the lowest level since April 2007.

Many analysts have been looking for a drawdown of inventory to boost the value of homes and in turn bolster many homeowners' wealth and spending power.

That said, the market's reaction to the latest report was muted compared with Friday's brisk 156-point jump in the Dow following better-than-expected data on sales of existing homes.

Despite reports of a new rise in home sales, the market traded within a tight range all day. Home builders KB Homes and Toll Brothers posted gains. Peter McKay reports after the closing bell.

Analysts said some buyers may already have placed bets on a housing recovery following that earlier release. Some market veterans also note that the housing data are being boosted by a rush from buyers looking to exploit a tax credit due to expire this fall.

In other economic news Wednesday, demand for durable goods rebounded sharply in July, staging its biggest gain in two years on the back of big orders for planes and capital goods. Orders for durable goods jumped 4.9% last month to a seasonally adjusted $168.43 billion, the Commerce Department said, the largest increase since 5.4% in July 2007. Economists surveyed by Dow Jones Newswires had projected a 3% gain in July orders.

However, orders for nondefense capital goods excluding aircraft, a key measure of business investment, slipped 0.3% in July. The weak reading had weighed on futures and looked to damp stocks, though some of that weakness was mitigated by the home sales report.

In other markets, oil prices tumbled following a second round of bearish inventory data. Crude futures closed down 62 cents at $71.40 a barrel in New York, on track for their second decline in the last seven trading sessions.

Euphoria in the oil market lost steam on Tuesday when the American Petroleum Institute, an oil-industry group, reported a 4.3-million barrel build in U.S. crude inventories for its latest weekly reporting period. Bearish sentiment took a firmer hold on Wednesday after the Energy Information Administration released its tally of inventories. The federal agency said stockpiles rose by 100,000 barrels last week.

"The traditional fundamentals are starting to take over again in this market," said energy analyst Phil Flynn, of PFGBest Research in Chicago. "We were being driven before on oil's relationship to stocks and the dollar, which are fundamentals in a sense. But now it's more about supply and demand," which looks likely to remain weak due to the lingering effects of the U.S. recession.

Treasurys were slightly weaker Wednesday afternoon after another satisfactory note auction, the second of three this week. In recent trade, the five-year note was off 1/32 to yield 2.449%, the 10-year added 1/32 to 3.437% and the two-year was 1/32 lower to yield 1.063%.