Stocks drop on housing data

The stock market gave back a hefty chunk of its July rally Thursday as fresh data pointed to more economic pain.

The housing-market turnaround that Wall Street has been counting on appeared no closer, and perhaps further away than ever, as June home-sale figures came in worse than expected.

The Dow Jones industrial average slumped 283.10 points, or 2.4%, to 11,349.28, the biggest decline since the index tumbled 358 points June 26.

The market sell-off, led by financial and builder stocks, took back 42% of the Dow’s 670-point rebound since it reached a two-year low July 15.

It was a broad-based decline: The Standard & Poor’s 500 index fell 29.65 points, or 2.3%, to 1,252.54; the Nasdaq composite dropped 45.77 points, or 2%, to 2,280.11.

Investors got several jolts Thursday from the housing sector.

First, the National Assn. of Realtors said sales of previously owned homes slid a larger-than-expected 2.6% in June from May, to an annualized rate of 4.86 million units -- the lowest in a decade.

In a separate report, the Census Bureau estimated that 18.6 million homes, apartments and condos now are vacant, up 7.2% from a year earlier.

In addition, shares of Calabasas-based builder Ryland Group plummeted after the company reported a $242-million second-quarter loss late Wednesday. The loss, along with red ink reported by rival Pulte Homes, put further pressure on builders’ stocks. Ryland dived $5.07, or 19%, to $21.43, wiping out all of its July rebound. Pulte was off $1.78, or 14%, to $11.03.

Among other builders, Lennar fell $2.47, or 18%, to $11.07, while KB Home sank $3.04, or 15%, to $16.70.

Finally, mortgage-finance giant Freddie Mac reported that mortgage rates surged over the last week, in large part because market jitters over the financial health of Freddie and sibling Fannie Mae raised the market interest rates on their bonds. As those yields rise, so do the interest rates on most individual mortgages.

The average 30-year fixed-rate home loan jumped to 6.63% this week, the highest in nearly a year and up from 6.26% last week. That means fewer people can qualify for a mortgage on any particular home -- the last thing the housing market needs.

Fannie Mae tumbled $2.98, or 20%, to $12.02, while Freddie Mac slumped $1.99, or 18%, to $8.81.

Wall Street knows there’s a rescue package for the housing market (and for Freddie and Fannie) awaiting Senate approval and President Bush’s signature. But that didn’t seem to give sellers any pause.

Still, given the market’s sharp rebound over the last week, some pullback was inevitable. Nimble traders have made a lot of money on paper in the last few days -- particularly in financial shares. And once stock prices turned down, there was an apparent rush to cash in:

Bank of America dropped $2.80, or 8.4%, to $30.64. It had rocketed from $18.52 on July 15 to $33.44 on Wednesday, an 80% rise in six sessions.

Merrill Lynch dived $4.77, or 14.1%, to $29.04, after soaring from $24.69 on July 15 to $33.81 on Wednesday.

Among other financial stocks, Citigroup slid $2.06, or 9.8%, to $19.06, while Wachovia declined $1.96, or 11%, to $15.69.

Washington Mutual fell 62 cents, or 13%, to $4.03 after dropping 20% on Wednesday as concerns persisted about the company’s mortgage portfolio. The nation’s largest thrift this week posted a $3-billion loss because of expected increases in losses on home loans.

An index of 88 financial stocks in the S&P; 500 fell 6.7%.

In other market highlights Thursday:

Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange.

The Russell 2,000 index of smaller companies fell 16.80, or 2.3%, to 702.39.

Yields on government bonds fell as some investors turned to the relative safety of Treasury obligations. The yield on the benchmark 10-year T-note fell to 4% from 4.12% late Wednesday.

The dollar was mixed against other major currencies, while gold prices fell.

Ford Motor said it lost $8.7 billion in the second quarter, largely because of a reduction in the value of assets. The company also said it would bring six models from Europe to North America by the end of 2012 as part of an effort to adjust to high gasoline prices. Ford’s stock fell 92 cents, or 15%, to $5.11.

Dow Chemical fell $1.13, or 3.3%, to $33.11 after reporting that sharply higher costs for energy and raw materials contributed to a 27% decline in profit.

Bristol-Myers Squibb beat expectations with an 8% rise in quarterly profit, while Eli Lilly reported a 44% jump in earnings. Bristol-Myers rose 23 cents to $22.12 and Eli Lilly advanced 38 cents to $48.

Amazon.com jumped $8.18, or 12%, to $78.72 after reporting late Wednesday that its second-quarter earnings more than doubled to easily top analysts’ expectations. The Internet retailer also raised its full-year revenue projections.

San Diego-based Qualcomm jumped $7.61, or 17%, to $52.43. The world’s largest maker of cellphone chips said a licensing settlement with Nokia could add 7 cents to 13 cents a share to its annual profit.

Overseas, key stock indexes fell 1.6% in Britain, 1.5% in Germany and 1.4% in France. Shares rose 2.2% in Japan.

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tom.petruno@latimes.com

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The Associated Press was used in compiling this report.