March 21, 2012 / 10:43 AM / 5 years ago

GLOBAL MARKETS-Shares edge lower, bonds rise, on data

5 Min Read

A woman smiles as she walks past an electronic board displaying graphs showing recent movements of Japanese market indices, outside a brokerage in Tokyo February 15, 2012.Yuriko Nakao

NEW YORK (Reuters) - Global stocks drifted lower after U.S. housing data was less encouraging than expected on Wednesday and government debt prices rose as investors sought safety in less-risky assets.

U.S. equities started the day flat and then meandered near break-even as the data suggested a still-challenging environment in the U.S. housing sector, despite signs of recovery.

Sales of existing U.S. homes slipped 0.9 percent to an annual rate of 4.59 million units, the National Association of Realtors said. But January's sales pace was revised up to 4.63 million units from a previously reported 4.57 million units.

The benchmark S&P 500 Index see-sawed between modest gains and losses, but remains up about 12 percent on the year. Some viewed the session as the start of a short-term pullback from a rally that has not seen a significant correction since October; others saw just the opposite, the pause that refreshes.

"I think we are leveling off here, but the overall story hasn't changed much," said Joe Benanti, managing director at Rosenblatt Securities in New York. "We might dip back a little, but I see equities moving back higher to 1430s, even 1450s" (on the S&P 500).

Others said investors were selling shares to lock in gains after this year's torrid pace.

"There are things that stood out today that made me believe this might be the start of a 2 (percent) to 4 percent correction - the relative weakness in energy and industrial stocks, and the reversal in financial stocks," said Seth Setrakian, co-head of U.S. equities at First New York Securities.

"Investors usually wait for the start of a new quarter to take some money off the table. That tends to happen a little early when everyone is expecting the same thing."

The Dow Jones industrial average .DJI closed down 45.57 points, or 0.35 percent, at 13,124.62. The Standard & Poor's 500 Index .SPX fell 2.63 points, or 0.19 percent, to 1,402.89. The Nasdaq Composite Index .IXIC gained 1.17 points, or 0.04 percent, at 3,075.32.

Analysts had expected the housing data to show an improving economy that would keep the Federal Reserve from launching a new round of a bond-buying program known as quantitative easing.

Fed Chairman Ben Bernanke has said more bond purchases remain an option, and he has warned about removing stimulus from the U.S. economy too soon.

Still, Narayana Kocherlakota, a non-voting member of the Fed's policy-setting committee who is president of the Minneapolis Federal Reserve Bank, said falling unemployment and inflationary pressures could change Bernanke's stance.

The Fed could start moving away from its near-zero interest rate policy as soon as this year, Kocherlakota told reporters.

MSCI's all-country world equity index .MIWD00000PUS lost 0.2 percent, crimping a rally of more than 10 percent so far in 2012 after reaching its highest level since August on Monday.

In Europe, the FTSEurofirst 300 index .FTEU3 of top regional shares fell slightly to close at 1,091.74. Emerging markets .MSCIEF slipped 0.1 percent.

The U.S. dollar pared gains against the yen on the housing data. The dollar was down at 83.38 yen. The euro fell 0.1 percent against the dollar, trading at $1.3208.

U.S. Treasury debt prices rose as investors took advantage of a recent gain in yields to do some bargain-hunting, although price losses were limited by expectations that a better economic picture would continue to erode the value of government debt.

Treasuries prices plunged last week and yields solidly broke above ranges that had held for four and a half months, as recent data has pointed to an economic recovery that is gaining steam, lowering expectations of further economic stimulus from the Fed.

"People are starting to price out the end of Fed support," said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts. "Over time, it is likely that as the economy recovers and we get stronger and stronger economic data, that yields will continue to rise."

Benchmark 10-year Treasury notes were trading 20/32 higher in price to yield 2.29 percent, while 30-year bonds were 40/32 higher to yield 3.38 percent.

Brent oil rose 8 cents to settle at $124.20 a barrel. U.S. crude futures settled $1.20 higher at $107.27 a barrel.

U.S. gold futures for April delivery settled up $3.30 at $1,650.30 an ounce.

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