On Monday, the Dow Jones Industrial Average fell 56.74 points to 13322.13, finishing near its low for the session. The blue-chip average is now up 6.9% on the year. The Standard & Poor's 500-stock index shed 12.58 to 1466.79, putting it up 3.4% year to date. The Nasdaq Composite Index declined 15.44 to 2561.25, leaving it up 6% since the end of last year.
Shares of mortgage lenders continue to suffer. After Lehman Brothers lowered its price target on Countrywide Financial and cut its 2007 earnings outlook for the mortgage giant, selling ensued. Countrywide shares dropped 4.8%, and its rivals were equally affected, as Thornburg Mortgage dropped 12% and Novastar Financial retreated 7.5%. Brokerages with large mortgage exposure also declined, with Bear Stearns and Lehman Brothers absorbing the hardest blows.
Housing stocks also came under pressure after a report showed sales of existing homes declined 0.2% during July. The national median selling price slipped by 0.6% year-over-year, and the inventory of unsold homes bulged 5.1% to nearly a 10-month supply. That represents the deepest stock of homes on the market since October 1991. Toll Brothers fell 4.7% and Hovnanian declined 6%, as the deep supply of unsold existing houses seemed likely to inhibit demand for new construction.
More housing news is due today, with the S&P/Case-Shiller housing-price index on tap. The index is expected to show continued price declines. However, Drew Matus, senior economist at Lehman Brothers, predicts that Case-Shiller will echo signs in Monday's existing-homes report that prices are holding up better than sales.
"There's a tremendous amount of disincentive to lower prices," he said. "People have a natural inclination not to sell a home for less than they paid for it," and they want to get prices at or near the levels their neighbors did.
In addition, minutes of the Federal Reserve's Aug. 7 meeting will also be released today.