Economic woes leave traders looking for the exit with the Dow losing triple digits on the session. The Dow ($INDU) gave up 130.84 points to close the session at 11,348.55. The S&P 500 ($SPX) lost 11.91 points to 1,266.69. The Nasdaq ($COMPQ) declined 32.62 points to 2,384.36. Volume was remained light on the session with 1.01 billion shares traded on the NYSE and 1.75 billion shares exchanged on the Naz. Market breadth was negative by an 8-to-23 and 8-to-21 margin on the Big Board and Naz respectively.

The bulls never really had a chance today following two economic reports that were bearish in nature. The fact that oil prices rose didn’t help either, although Home Depot (HD) did report better than expected earnings. Financial shares fell Tuesday, following up on losses seen Monday after reports Fannie Mae (FNM) and Freddie Mac (FRE) might be in need of a bailout by the U.S. government. Overall, after hitting resistance, the major market indices have suffered losses, but the hope is this is just some profit taking before another move higher.

FNM shares fell another 1.6 percent Tuesday with FRE down 5.0 percent. Shares of Lehman Brothers (LEH) fell hard Monday after the Wall Street Journal said the company stands to lose $1.8 billion in the quarter. The stock continued its decline Tuesday, off 13.0 percent to $13.07 on reports the company is looking for possible buyers of its investment management business. Other financial stocks seeing losses included AIG (AIG), down 5.7 percent and Bank of America (BAC), off 4.2 percent.

Data on producer prices added to the disappointing news released last week about consumer prices. For July, the PPI rose 1.2 percent, well above estimates for growth of 0.5 percent. The core rate, which excludes food and energy, rose 0.7 percent, 5-tenths higher than estimates. The year on year rate rose to 9.8 percent from 9.1 percent in June with the core rate up 3.6 percent in July, up from 3.1 percent.

If is the PPI data wasn’t bad enough, traders also had to digest the housing starts data for July. Starts fell 11.0 percent during the month, more than offsetting the 10.4 percent gain seen in June due to a change in building code in New York City. In the past year, building permits are down 29.6 percent. Another negative in the report was the 17.7 percent drop in building permits, which points to further weakness in the months ahead.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site