Stocks fell sharply Tuesday, dragged down by disappointing housing data and weakness in energy shares amid uncertainty about regulating offshore drilling. Existing-home sales fell 2.2 percent in May from April, and Fitch Ratings slashed its rating on BNP Paribas, the largest bank in the euro zone by deposits.
The S&P shed 1.6 percent. The CBOE volatility index, widely considered the best gauge of fear in the market, was above 26 at the closing bell.
Sales of previously owned homes fell unexpectedly in May as delays in processing mortgage applications hampered the closing of contracts benefiting from a popular homebuyer tax credit, an industry group said on Tuesday. Although the tax credit for home buyers expired in April, qualified home owners have until June 30 to close contracts. “There hasn’t been much of a rebound in housing. We are growing from the extremely low levels of last year. On average, we’re looking for flat sales. The housing market, whose collapse dragged the economy into its longest and deepest recession since the 1930s, still faces major challenges from foreclosed properties, which are keeping the supply of houses elevated and prices depressed. The decline in sales last month was broad-based, with sales of single-family dwellings sliding 1.6 percent. Condominiums and co-ops dropped 6.8 percent.
A federal judge reversed the six-month ban on deepwater drilling imposed by the Obama administration. The White House vowed to appeal.
Financial stocks ended lower as House and Senate Democrats are scrambling to complete their financial regulation overhaul before President Obama meets with world leaders at G20 meeting in Canada this weekend, ironing out differences on a range of complicated provisions from bank regulation to consumer protection.
The Federal Reserve’s Open Market Committee begins its two-day policy meeting Tuesday, issuing its latest pronouncement on interest rates and the economy Wednesday at around 2:15 pm New York time.
The Fed is expected to keep its key policy rate—the federal-funds target rate, at record low near zero to revitalize the economy, a decision the central bank has maintained since December 2008.
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