Stocks slipped early today as housing starts slumped to a new five-month low, FedEx Corp said higher costs would constrain earnings, and as new concerns surfaced over Spain's fiscal problems.
The government’s report on housing created some apprehension that the housing market is resisting a recover which could stifle the economic rebound. New construction for apartments and homes fell 10 percent in the last month and a 17 percent decrease in construction of single-family homes was the largest slide since January of 1991. In addition, applications for building permits saw a 5.9 percent decrease which was the lowest level in a year.
This large decrease in housing data is disheartening for many investors, but can be directly related to the homebuyer tax credit which expired this past April. The drop in the home construction and permit numbers extends a string of weak housing data and many analysts find it too soon to tell how housing will fare in the near future.
Results from FedEx Corp. also created some concern about the economy today. The company is typically viewed as indicator of the strength of the overall economy because as business picks up, shipping demands typically improve as well. Today, FedEx fell 2 percent to $81.30 as the company warned that higher costs would constrain 2011 earnings. The company’s outlook has helped cause the market to give up some of yesterdays substantial gains.
More fears about Spain and Europe, and their impact on banking and liquidity are re-emerging which places systemic worry on the world’s market. The premium that investors demand to hold 10-year Spanish government bonds rather than euro zone benchmark German Bonds hit a euro lifetime high, even as the EU denied a report with regards to preparing a financial safety net for Spain.
Stocks came off their early lows after the euro strengthened. A Spanish newspaper reported that the International Monetary Fund and European Union were trying to come up with a financial rescue for Spain. Officials in Spain denied the report and the euro rose to $1.2326. The U.S. markets have been tracking the moves of the Euro since major stock indexes hit their 2010 peak in late April. Investors see the shifts in the euro as a reading on confidence in Europe's ability to cut spending without endangering an economic rebound there.
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