Stocks decline as investors await Fed statement

NEW YORK — A rise in existing home sales could not stoke the stock market as investors awaited the Federal Reserve’s decision on interest rates.

Stocks moved lower in late morning trading Tuesday after the National Association of Realtors said May sales of existing homes rose 2.4 percent. The increase was smaller than economists’ forecast for 2.8 percent, and not enough to alleviate investors’ anxiety about economic reports later in the week on durable goods orders, new home sales and personal spending.

“There’s not a lot of conviction on behalf of buyers,” said Jim Herrick, manager of equity trading at Baird & Co.

“The market has priced in good second-quarter earnings, and priced in the economy moving out of recession by the fourth quarter,” Herrick said. “If you see any data that refutes that, the market will head lower.”

This week brings two more reasons to be tentative: the Fed’s monetary policy meeting, and Treasury auctions.

The central bank is widely expected to keep its key rate near zero after its two-day meeting concludes Wednesday, but investors are unsure how optimistic the policymakers will be in their economic assessment — and whether the central bank will consider raising rates later this year to curb inflation.

Meanwhile, the Treasury Department plans to auction $104 billion in government debt this week, $60 billion of which will be sold on Tuesday afternoon. Any evidence that demand for government debt is waning could give investors a scare.

Treasury demand needs to stay strong for the government to finance its bailout and stimulus programs without significantly raising yields. Bond yields also affect borrowing rates for consumers.

In late morning trading, the Dow Jones industrial average slipped 31.97, or 0.4 percent, to 8,307.04. The Standard & Poor’s 500 index fell 1.31, or 0.2 percent, to 891.73, and the Nasdaq composite index fell 7.33, or 0.4 percent, to 1,758.86.

The biggest loser among the 30 Dow stocks was Boeing Co., which fell $4.04, or 8.6 percent, to $42.86 after again delaying the first test flight of its long-awaited 787 jetliner. The company said it needed to reinforce part of the aircraft.

The stock market rallied sharply between early March and early June, and has given up some ground over the past several days. The Dow on Monday shed 201 points, the worst daily drop in more than two months.

The recent selloff, however, has brought very little volatility, and that’s a positive sign, said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York.

“The fact is, you can’t keep going straight up,” Fullman said. “There’s a chance we’ll still see some downward movement in the next week or two — the market really needs a correction.”

Government bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, edged down to 3.65 percent from 3.69 percent late Monday.

Declining stocks outnumbered advancing stocks by about 8 to 5 on the New York Stock Exchange, where volume came to 336 million shares, down from 344 million shares at the same time Monday.

The Russell 2000 index of smaller companies fell 2.64, or 0.5 percent, to 490.17.

After tumbling on Monday, the price of crude oil fell another 40 cents to $67.10 a barrel on the New York Mercantile Exchange.

The dollar was mixed against other major currencies. Gold prices rose.

Overseas, Japan’s Nikkei stock average sank 2.8 percent. In late trading, Britain’s FTSE 100 fell 0.1 percent, Germany’s DAX index rose 0.1 percent, and France’s CAC-40 fell 0.5 percent.