Stocks dip as tech outlook and housing take toll

NEW YORK: U.S. stocks broke three days of gains on Wednesday, Nov 18 following worrisome outlooks from two major software makers and a surprising drop in home CONSTRUCTION [] last month, according to Reuters.

But stocks sharply cut the session's losses just before the closing bell as many investors pointed to a strong uptrend in equities that have pushed major indexes to 13-month highs in recent days. The S&P 500 has ended down only three times in the last two weeks

Business software maker Autodesk Inc was cautious about the outlook for the current quarter, while sector peer Salesforce.com Inc reported a slowdown in new business. The news was a setback to investors looking for signs of a pickup in demand.

The government said housing starts declined to their lowest level in six months, weighed down by a sharp fall in construction activity for both single-family and multi-family dwellings, a sign the housing market is still under pressure.

Henry Smith, chief investment officer at Haverford Trust Co in Philadelphia, said that despite these setbacks, the equity market was experiencing tailwinds from low interest rates, government stimulus spending and signs of economic recovery.

"We are of the continued belief that right now, the tailwinds propelling the market are still outweighing the headwinds," he said.

The Dow Jones industrial average dropped 11.11 points, or 0.11 percent, to 10,426.31. The Standard & Poor's 500 Index dipped just 0.52 of a point, or 0.05 percent, to finish at 1,109.80. The Nasdaq Composite Index lost 10.64 points, or 0.48 percent, to end at 2,193.14.

Autodesk shares slid 10.4 percent to $24.20 and weighed on the Nasdaq, a day after the company, which licenses software to companies on a per-user basis, warned its recovery could be hindered by more job losses. Meanwhile, Salesforce fell 3.1 percent to $63.61 on the New York Stock Exchange.

"TECHNOLOGY [] has been a strong area of the market, and those two results broke the momentum," said Nick Kalivas, vice president of financial research and senior equity index analyst at MF Global in Chicago.

The Dow Jones U.S. Home Construction index climbed 0.8 percent, bolstered by a Citigroup upgrade of Pulte Homes Inc to "buy" from "hold." Pulte rose 4.6 percent to US$10.04.

While the decline in new construction raised concerns about the recovery, it could bode well for removing remaining inventory from the market, something analysts say must happen for the housing sector to recover.

Losses were kept in check by advances in the financial sector. The S&P financial index added 0.9 percent after hedge fund billionaire John Paulson said Bank of America Corp stock could double in two years. Bank of America's shares rose 3.7 percent to US$16.35.

Paulson made his comments in an investor note that was reported by Bloomberg News.

Analysts said the inverse correlation between the dollar and equities -- which has helped to boost natural resource stocks by lifting the price of dollar-denominated commodities -- appeared to break down.

A bevy of mining and energy shares declined, even as the dollar fell and gold hit a record high above US$1,150 an ounce. Freeport McMoRan Copper & Gold Inc was off 0.8 percent at US$84.69, while ConocoPhillips slipped 0.2 percent to US$53.58.