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Wall Street closes modestly lower, dogged by credit and economic worries as oil prices rise

NEW YORK — Wall Street closed slightly lower in erratic trading Thursday as investors, uneasy about the credit markets and record-high oil prices, took little solace from reports on new home sales and durable goods orders.

The Commerce Department said sales of new homes rose 4.8 percent in September from August's levels. The market initially popped on the data, as economists had predicted a decline. But it eventually pulled back because the sales increase was due to a big downward revision in August's decline, and that homebuilders had offered discounts in September to move inventory.

"The sad part is, even with the discounts, we still have inventory overhang. And that's a problem," said Michael Strauss, chief economist at Commonfund. He noted that home prices are still falling, as are sales of existing homes, which make up the majority of the housing market.

Another report showed that orders of big-ticket items, one gauge of business spending, fell 1.7 percent in September, following August's 5.3 percent drop. The economic data drew close attention by Wall Street as investors look for clues to determine if the Federal Reserve will lower rates at its meeting next week.

Meanwhile, investors also had to contend with higher energy prices — crude oil spiked to an all-time high of $90.60 a barrel before settling slightly lower — and credit worries continued to dog the market. Speculation that insurer American International Group Inc. might suffer credit costs weighed on the Dow Jones industrial average, which later rebounded from its lows.

According to preliminary calculations, the Dow fell 3.33, or 0.02 percent, to 13,671.92 after changing direction several times. The blue chip index was briefly down more than 100 points.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 1.48, or 0.10 percent, to 1,514.40, while the Nasdaq composite index fell 23.90, or 0.86 percent, to 2,750.86.

Treasury bond prices stalled as investors moved in and out of the stock market. The yield on the benchmark 10-year Treasury note, which moves inversely to the price, was unchanged at 4.35 percent from its close on Wednesday.

Investors appeared unsure both about the direction of the economy and whether the central bank will be compelled to lower interest rates again to boost spending. The central bank reduced rates last month by a half-percentage-point.

Many seem to believe the Fed will cut rates several times over the next six months to keep the economy moving forward, said Paul Nolte, director of investments at Hinsdale Associates.

However, there does remain some doubt. Commonfund's Strauss said "the Fed may not be as aggressive as the market is hoping. "We're still going to get a decent third-quarter GDP number, and there's pressure from the energy complex that we're concerned about," he said.

Meanwhile, the housing report released Thursday might not be enough to sway the Fed in either direction. Dave Seiders, the National Association of Home Builders' chief economist, said some of the data in the government report might not give an accurate picture of the industry.

"If you look at the composition of this, all of the increase was recorded in the West region, which from other sources we know actually is very weak," he said. "So I have a problem with the legitimacy of the reported increase in September."

Rising energy prices also unsettled the market. Crude futures rose $3.36 to close at $90.46 a barrel on the New York Mercantile Exchange due to concerns about OPEC oil ministers not meeting demand.

And mixed earnings reports added to the uncertainty. Motorola Inc. and data storage specialist EMC Corp. showed respectable growth, but Comcast Corp. and Symantec Corp. disappointed investors.

Motorola managed in the third quarter to post its first quarterly profit this year. The cell phone maker's earnings expectations for the fourth quarter were higher than forecasts, and shares rose 76 cents, or 4.1 percent, to $19.31.

EMC said third-quarter profit rose 77 percent largely due to growing sales of data storage software and hardware. EMC shares rose $1.97, or 8.7 percent, to $24.40.

But dragging on the technology-dominated Nasdaq, Symantec issued disappointing guidance. The security software maker's shares tumbled $2.52, or 11.99 percent, to $18.50. Comcast fell $2.57, or 11 percent, to $21.28 after it missed Wall Street expectations.

The dollar fell against most other major currencies, except the yen, while gold prices rose.

The Russell 2000 index of smaller companies fell 4.74, or 0.58 percent, to 806.11.

Declining issues outnumbered advancers by 3 to 2 on the New York Stock Exchange, where volume came to 1.49 billion shares, up from 1.31 billion on Wednesday.

In Asian trading, Japan's Nikkei stock average fell 0.45 percent, but Hong Kong's Hang Seng index rose 1.78 percent. In European trading, Britain's FTSE 100 rose 1.45 percent, Germany's DAX index rose 1.32 percent, and France's CAC-40 rose 1.51 percent.

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