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U.S. stocks retreat on unexpected decrease in home sales

(Bloomberg) — U.S. stocks fell for a second day as sales of existing homes unexpectedly slumped and the Federal Reserve said it will cut the size of two programs meant to bolster credit markets. Oil fell to a one-month low, while Treasuries rose.

Alcoa Inc., Caterpillar Inc. and DuPont Co. dropped at least 2 percent after the National Association of Realtors said purchases declined 2.7 percent last month. Standard Pacific Corp. sank 4.6 percent to lead declines in homebuilders. American Express Co. and Bank of America Corp. retreated after the Fed said it will shrink emergency programs that auction loans to commercial banks and Treasuries to bond dealers.

“The housing data disappointed and investors will be looking for signs that the Fed will pull back a bit on the stimulus,” said Mark Bronzo , a money manager at Security Global Investors, which oversees $21 billion in Irvington, New York. “The stock market is tired and we may see a sell-off going to the end of the quarter.”

The Standard & Poor’s 500 Index lost 0.8 percent to 1,052.17 at 10:35 a.m. in New York after rallying as much as 0.5 percent earlier. The Dow slipped 43.6 points, or 0.5 percent, to 9,704.95.

Benchmark indexes rose in early trading after an unexpected decrease in jobless claims bolstered speculation that the economy is emerging from the worst recession in seven decades.

The S&P 500 yesterday dropped from its highest level since October. A 57 percent rally since March 9 has left the measure valued at about 20 times the reported earnings of its companies, the most expensive level since 2004, according to weekly data compiled by Bloomberg.

Economy ‘Picked Up’

The Fed signaled that the U.S. economy’s return to growth is insufficient to withdraw stimulus as officials seek to reduce the highest unemployment rate in a quarter century. While the economy has “picked up,” the central bank’s planned asset purchases will help ensure a “gradual return to higher levels of resource utilization,” the Fed’s Open Market Committee said yesterday.

U.S. President Barack Obama and his counterparts from G-20 nations meet today warning that the recovery is still too weak to start reversing lifelines to banks and the broader economy.

Morgan Stanley strategist Jason Todd today raised his year- end forecast for the S&P 500 to 1,050 from a previous estimate of 900. That’s still 1 percent below yesterday’s closing price.

“The current rally is typical of what follows major bear markets and is not, in our view, the start of a new multi-year bull market,” New York-based Todd wrote in a report to clients.

About Ross Reily

Ross Reily is editor of the Mississippi Business Journal. He is a husband to an amazing wife, dad to 3 crazy kids and 2 dogs. He is also a fan of the Delta State Fighting Okra and the Boston Red Sox.

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