U.S. stocks continued to slide as concerns about the Middle East and rising oil prices remained the dominant theme for investors. 

Oil’s late morning and early afternoon climb induced renewed selling pressure among stocks.  At its session low, the S&P 500 was down 1% to the 1300 line.  However, oil prices eased in the late afternoon allowing stocks to finish comfortably above their session low.

Crude oil prices continue to rise today with futures above $100 at the New York Mercantile Exchange and $114.62 on the ICE Futures Europe exchange. As I’ve mentioned in previous days, high oil prices are a threat to economic growth because they act as a tax on consumers – they spend more dollars at the gas pump and, thus, have less dollars to spend elsewhere.  I’ve seen multiple sources say that oil prices at $120 a barrel is the level at which economic growth will be affected.

Energy was the only sector to record gains, which should be no big surprise.  The other nine S&P 500 sectors moved lower, with the smallest losses in defensive sectors Utilities and Consumer Staples.  Treasurys also benefited from an interest in safety.

Existing home sales and mortgage applications reports were released yesterday.  More on that after the jump.

Market Activity for February 23, 2011

Sector Activity for February 23, 2011

Existing Home Sales Strengthen, but Pricing Still Weak

Sales of existing homes unexpectedly rose in January, marking the fifth time in six months that demand has increased.  Still the housing market is troubled by falling prices – the median home price of $158,800 is the lowest since April 2002.  And Tuesday the S&P/Case-Shiller index of home values in 20 cities fall by 2.4% in December from a year earlier. 

A big part of the problem is that distressed properties are weighing down prices.  In January, distressed properties accounted for 37% of all existing home sales, which puts a great deal of pressure on prices.  And this trend is not going to slow down in 2011.  Even more distressed properties will hit the market as the foreclosure moratorium expires, creating even more pricing pressure.

In other housing related news, mortgage applications increased 17.8% from the previous week as borrowers took advantage of lower rates (the 30-year fixed rate mortgage decreased to 5.00% from 5.12%).  The season adjusted Purchase Index increased 5.1% from a week earlier, but the four-week moving average remains at 1997 levels, which suggests weak home sales in the first few months of 2011.

Brent will be back tomorrow.  Have a great day!

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