Soft U.S. home sales knock stocks, dollar lower
NEW YORK (Reuters) - U.S. stocks and the dollar declined on Monday while Treasury bonds rallied after an unexpectedly weak report on U.S. new-homes sales reinforced a view that the Federal Reserve will cut interest rates.
U.S. crude oil futures rose to their highest this year to date, boosted by renewed tensions over Iran's nuclear program and the capture of British military personnel by Iran.
Led by a decline in the shares of home builders, U.S. stock prices fell sharply after a government report showed sales of new U.S. homes fell to the lowest rate in almost seven years in February.
"This disappointing number highlights the ongoing risk of slower housing activity on the broader economy," said Alex Beuzelin, senior market strategist at Ruesch International in Washington D.C.
The number "adds greater traction to the idea that the Fed's next move will be an interest rate cut," he said.
The Standard & Poor's 500 index .SPX was trading down 0.78 percent at 1,424.87. All 16 component stocks of the Dow Jones U.S. home builder index .DJUSHB declined, led by a drop of more than 2.5 percent in Champion Enterprises CHB.N.
The Dow Jones industrial average .DJI was down 0.67 percent at 12,396.06
The Nasdaq Composite Index .IXIC fared slightly better, declining 0.64 percent to 2,433.48 and gaining some support from a rally of more than 2 percent in the shares of Dell Inc. (DELL.O), which rose after a ratings upgrade by Goldman Sachs.
European shares also declined after the U.S. housing data. The FTSEurofirst 300 index .FTEU3, which measures the performance of Europe's 300 largest companies, had slipped 0.9 percent by the close of trade.
BOND RALLY
Treasuries prices rose after the U.S. new-home sales data, another positive for bonds after the Fed last week dropped an item in its policy statement signaling that the central bank could tighten monetary policy further.
Benchmark 10-year Treasury notes US10YT=RR were yielding 4.58 percent, compared with 4.62 percent late on Friday. The yield on 2-year Treasuries US2YT=RR slipped to 4.57 percent from 4.61 percent.
Meanwhile the dollar fell, giving up earlier gains against the yen and the euro. The euro EUR= was trading up 0.35 percent at $1.3330, while the dollar was down 0.22 percent at 117.84 yen JPY=.
Crude oil futures CLc1 were trading up 1 percent at $62.93 in New York, buoyed by the latest tensions between the West and Iran, the world's fourth-largest oil exporter.
Iran said on Sunday it would not stop its nuclear program, which it insists is only for peaceful purposes but which major powers fear could be used to develop nuclear weapons.
The tensions with Iran also helped boost the price of gold more than 1 percent. Gold rose as high as $664.30 an ounce on the spot market XAU= before easing to $663.10/$664.10, up around $6 from its level late on Friday in New York.
