NEW YORK - WALL Street edged lower Wednesday, as investors, already nervous about the fate of the top US automakers, scoured more discouraging economic data.
Investors vacillated in early trading, trying to hold on to the gains achieved in the previous session. But they found little consolation in new reports on consumer prices and new-home construction, which provided more evidence that the economy remains in flux.
According to the Labor Department's Consumer Price Index, consumer prices plunged by the largest amount in the past 61 years in October as gasoline pump prices dropped by a record amount. While lower prices might be good for the consumer, they can hurt corporate profits. Lower prices also raise the threat of deflation, a prolonged bout of falling prices that hasn't been seen in the US since the Great Depression of the 1930s.
Meanwhile, a government report on the housing sector showed that the industry's severe correction continues. The Commerce Department reported that construction of new homes plunged 4.5 percent last month to the lowest level on government records.
The market is also bracing for more testimony in Congress from the heads of General Motors Corp., Ford Motor Co., and Chrysler LLC.
They are asking lawmakers for a massive infusion of cash to prevent millions of layoffs, stave off bankruptcy and stabilize the companies.
Investors are concerned at the repercussions should any of the three automakers collapse, an event that could ripple through an already battered economy. Congressional Democrats have proposed using part of the US$700 billion (S$1 trillion) financial bailout package to pump into the ailing auto industry, but Republicans oppose such an approach.
In the first hour of trading on Wednesday, the Dow Jones industrial average fell 61.41, or 0.73 per cent, to 8,363. Standard & Poor's 500 index fell 7.13, or 0.83 per cent, to 851.99, while the Nasdaq composite index fell 8.23, or 0.55 per cent, to 1,475.04.
Wall Street rebounded on Tuesday in another turbulent session, as investors rushed back into the market after testing a 2003 low. The Dow finished up 151 points, with most of the gains coming in the final hour of trading.
Volatility in the stock market has kept demand for Treasury bonds high. The yield on the benchmark 10-year Treasury note fell to 3.47 percent from 3.53 percent on Tuesday.
The dollar fell against other major currencies, while gold prices rose.
Light, sweet crude added 80 cents to US$55.19 a barrel on the New York Mercantile Exchange. -- AP
