Yesterday, the stock market turned on a dime, going from what appeared to be a straight shot toward new multiyear highs to a disappointing decline. This morning, the ill feelings from that reversal continued, despite indications of some strength in the housing market. Existing-home sales rose 2.3% in July, and the prices of those homes increased by nearly 10%. Yet the pace of growth is still slower than what we saw during spring, reflecting the conflict that investors have in assessing economic strength. Just after 10:45 a.m. EDT, the Dow Jones Industrials (INDEX: ^DJI) were down about 30 points, even though the broader market was much closer to unchanged.
Hewlett-Packard (NYSE: HPQ) helped pull the Dow down, falling more than 2% in early trading. The company doesn't report its latest quarterly earnings until this afternoon, but the stock is responding to news that Dell expects disappointing results for its current quarter, due to weak PC demand. Unless HP can break away from the same trends, investors could face similar disappointment from HP's fiscal-third-quarter results.
Home Depot (NYSE: HD) rose about half a percent. Good news on the housing front is obviously positive for the home-improvement retailer. But Home Depot is also benefiting from woes at Lowe's (NYSE: LOW), which missed analyst estimates in its quarterly earnings report earlier this week and indicated continuing losses of market share. As long as Home Depot can keep executing better than its rival, its stock could continue to enjoy strong gains.
Finally, oil stocks were down somewhat, with both ExxonMobil (NYSE: XOM) and Chevron falling about a quarter of a percent. Controversy has swirled around the possibility that the Obama administration might release oil from the nation's Strategic Petroleum Reserve. With oil prices still below $100 per barrel, it's unclear why now is a better time for such a move than when prices were higher, which has skeptics pointing at political considerations overwhelming true market conditions.
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