By STEPHEN BERNARD and TIM PARADIS
AP Business Writers
NEW YORK (AP) — Stocks slid early Wednesday as an unexpected drop in home construction raised concerns about the pace of the economy’s recovery.
The Commerce Department said construction of homes and apartments fell 10.6 percent in October to an annual rate of 529,000, well below the pace of 600,000 that economists polled by Thomson Reuters expected.
Joe Heider, president of Dawson Wealth Management in Cleveland, said the disappointing results “will push against what was a very bullish attitude on Wall Street.”
Heider said investors were trying to determine whether the slowdown signaled weakness in the economy or a reluctance among builders to break ground when the future of a homebuyers’ tax credit was uncertain. Lawmakers extended a tax credit for first-time homebuyers that was set to end this month through June.
Building permits, a key indication for future activity, slid 4 percent to an annual rate of 552,000, also below the rate of 580,000 that analysts had forecast.
In midmorning trading, the Dow Jones industrial average fell 70.82, or 0.7 percent, to 10,366.60. The Standard & Poor’s 500 index fell 5.77, or 0.5 percent, to 1,104.55, while the Nasdaq composite index fell 19.35, or 0.9 percent, to 2,184.43.
Heider said another drop in the dollar would help the market absorb the housing report. Stocks often move opposite the dollar as weakness in the currency boosts demand for commodities. That, in turn, strengthens shares of energy and materials companies as well as exporters whose goods become cheaper to foreign buyers.
There was little reaction a report that found inflation at the retail level remained tame as rising unemployment, nervous consumers and tight credit keep prices stable.
The Labor Department said consumer prices rose 0.3 percent in October, slightly above the 0.2 percent economists expected. Core inflation, which excludes volatile energy and food prices, rose 0.2 percent, compared to expectations of a 0.1 percent rise.
A report released Tuesday on prices at the wholesale level showed rapid inflation was not imminent, supporting comments from Federal Reserve Chairman Ben Bernanke’s earlier in the week.
The dollar mostly fell against other currencies, while gold prices rose, touching another record. Gold rose $8.10 to $1,147.50 an ounce, after rising as high as $1,151.00 earlier in the day.
Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.36 percent from 3.33 percent late Tuesday.
Crude oil rose 63 cents to $79.77 per barrel on the New York Mercantile Exchange.
Falling stocks outnumbered those that rose 8-to-5 on the New York Stock Exchange, where volume came to 183.6 million shares compared with 156.5 million shares traded at the same point Tuesday.
The Russell 2000 index of smaller companies fell 3.98, or 0.7 percent, to 598.36.
Overseas, Japan’s Nikkei stock average fell 0.6 percent. In afternoon trading, Britain’s FTSE 100 rose 0.1 percent, Germany’s DAX index gained 0.4 percent, and France’s CAC-40 rose 0.3 percent.