Traders-Blog.com

Stocks closed lower after the Bush administration said an offer by Iran to hold negotiations on its nuclear program falls short of U.N. demands to halt uranium enrichment. Investors are worried any worsening of the conflict with Iran could send crude prices higher. Additionally, a softer than expected report on the housing market revived economic worries on Wall Street.

Today, the Dow Jones industrial average closed down 41.94 or 0.37% to 11,297.90, the broader Standard & Poor’s 500 index closed down 5.83 or 0.45% to 1,292.99, and the tech heavy Nasdaq composite index closed down 15.36 or 0.71% to 2,134.66.

Market breadth was negative. On the New York Stock Exchange, losers beat winners 11 to 5 on volume of 1.2 billion shares. On the Nasdaq, decliners beat advancers also by two to one as 1.5 billion shares changed hands.

Iran continues to ‘Priority One.’ The State Department acknowledged that the response falls short of the conditions set by the Security Council, which require the full and verifiable suspension of all enrichment related and reprocessing activities.

In data news, the home sales number came out so weak that it upset investors. The weak report may reinforce fears that the Federal Reserve has lifted interest rates to a point that has choked off not only inflation, but also growth, raising the specter of a recession. Sales of existing homes plunged 4.1% to a seasonally adjusted annualized rate of 6.33 million, against the expected 0.9% decline to 6.56 million. The inventory of unsold homes rose 3.2% to a 3.856 million, the highest since April 1993. Investors will get another look when the Commerce Department reports new home sales.

The star of the day, stock of Gateway Inc. closed up $0.23 or 13% to $1.95, after the PC maker received a $450 million bid for its retail operations from Lap Shun (John) Hui, owner of Joui International and a former owner of e-Machines. In a separate statement, the investor said he would consider buying all shares of Gateway. Additionally, Harbert Management Corp. has acquired a 10.2% of Gateway’s outstanding stock. All this has suddenly got investors interested in the company.

National Semiconductor closed up $0.79 or 3.5% to $23.37, after lowering its quarterly sales target due to reduced shipments of chips used in mobile phones. The company, however, maintained its gross profit margin target.

Shares in Ford Motor Co. closed up $0.34 or 4.6% to $7.76 on a Wall Street Journal report that the auto maker was interested in joining a Renault-Nissan alliance, if talks with General Motors Corp. don’t work out. The company as recently approached Nissan and Renault CEO Carlos Ghosn about a possible three way tie up.

Shares of International Business Machines closed down $0.28 to $78.67, after it announced that it is acquiring Internet Security Systems Inc. for $1.3 billion. The companies expect the deal to close in the fourth quarter. This led the shares of Internet Security to close up $1.62 or 6.3% at $27.60.

U.S. light crude oil for October delivery fell $1.34 to settle at $71.76 a barrel on the New York Mercantile Exchange. Futures fell after the latest weekly government supply data showed a smaller than expected decline in crude stocks.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter
30-day risk-free trial