Biggest drop ever in home prices

Sales of existing homes increased slightly in October as home prices had their biggest year-over-year decline ever, the National Association of Realtors reported today.

Some housing experts said the report signals that the U.S. housing market may be reaching a bottom, but a full recovery isn’t imminent.

Stocks, meanwhile, moved modestly higher on the day. The Dow Jones industrials pushed ahead nearly 15 points to 12,136. The Standard & Poor’s 500 Index added 4.8 points to nearly 1,387, and the Nasdaq Composite Index was up 6.7 points to 2,413.

Home sales ran at a seasonally adjusted rate of 6.24 million units, up 0.5% from September and better than economists’ estimates of a 6.15-million-unit rate.

The median price of a home was $221,000, unchanged from September but down 3.5% from October 2005. The price decline was the biggest year-over-year change ever, breaking the old record of a 2.1% decline in November 1990, when pressures were building for a war with Iraq over Kuwait. And it was probably due to sellers' agreeing to take less to sell a home, said David Lereah, the chief economist of the trade organization.

Single-family home sales rose 1.3% in October to a seasonally-adjusted rate of 5.5 million from September while condominium sales fell 4.8% to 741,000 rate. For the year, single-family detached home sales are down 11%; condo sales are down 14.5%.

The modest rise in October home resales "is helping build some excitement that we might be seeing a bottom ... a settling back down in the housing market, but not really a bubble bursting," said Marc Pado, chief U.S. market strategist at Cantor Fitzgerald in San Francisco.

But David Blitzer of Standard & Poor’s Corp. told CNBC’s "Street Signs" that the bottom won’t come until mid-2007.

While a bottom may be nearing, CNBC’s Bob Pisani said, traders on Wall Street were warning that a recovery to levels of a year ago isn’t likely because the supply of homes for sale is still growing. Home building stocks were modestly lower on the day.

At the end of the month, the Realtors report said, there were 3.85 million homes for sale, representing a 7.4-month supply. The total inventory is up 34% from a year ago, and the supply (which measures how many months it would take to reduce the inventory to zero) is up 51% from a year ago to the highest level since April 1993.

• Video on MSN Money: How much house can you buy?

Housing, Bernanke, factory orders keep stocks in check

The good news from the stock market was that stock prices recovered -- if only slightly -- from yesterday's big losses.

Four factors, including the home sales report kept the market in check.

The second factor was Federal Reserve Chairman Ben Bernanke, who warned in a speech this afternoon that that, while energy prices are falling, core inflation remains "uncomfortably high." But he said the economy is moderating a bit, mostly thanks to weakness in the housing and the automotive sectors. Bond yields fell after the text of his speech was released. The yield on the 10-year Treasury note fell to 4.51% from 4.54% on Monday.

The third factor was the Commerce Department’s report that durable-goods orders fell 8.3% in October, the largest drop since July 2000. The drop, in part due to weakened demand for commercial airplanes, was the third in the past four months to show orders falling or making no gain -- a sign that the economy is slowing. Orders jumped 8.7% in September. Economists expected orders to rise 4% in October.

Stocks had fallen broadly on Monday on worries about the health of the economy and the dollar’s fall against major currencies.

The last factor was energy prices. Natural gas was up 4% to $8.32 per million British thermal units. Crude oil in New York was at $60.99 a barrel, up 67 cents from Monday.

Gainers were ahead of decliners on the New York Stock Exchange by 1.4 to 1. Decliners were slightly ahead of gainers on Nasdaq, thanks mostly to weakness in semiconductors. The Philadelphia Semiconductor Index ($SOX.X) was flat on the day, held back by weakness in wireless chip maker Broadcom (BRCM, news, msgs).

Dollar General (DG, news, msgs) was the leader in the S&P 500 with a 5.4% rise on reports that buyout companies are eyeing the company. Tellabs (TLAB, news, msgs) was the S&P loser, down 5.6% after Lehman Bros. analyst Marcus Kupferschmidt trimmed his target price and fourth-quarter outlook for the telecommunications equipment company due to slower-than-expected demand from telecom carriers.

ExxonMobil (XOM, news, msgs) was the Dow’s leader with a 2.3% gain thanks to the rise in energy prices. General Motors (GM, news, msgs) was the loser, down 1.4%, a continuation of last week’s sell-off precipitated by Kirk Kerkorian’s decision to reduce his holdings. The stock finished $29.94 and is down more than 14% so far in November.

Cisco Systems (CSCO, news, msgs) jumped 4.8% after CEO John Chambers said the growth rate implied by its impressive first-quarter results is sustainable.

Apple Computer (AAPL, news, msgs) rose 2.5% to $91.61 after UBS raised its target price to $108 from $95. UBS cited solid iPod sales along with momentum for more Mac accessories and software longer term. UBS expects Apple will launch new products in next year, including cell phones, iTV & even ultraportable devices.

Energy prices -- New York close

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$60.99	$60.32	$0.6700	3.85%	-0.08%
Heating oil (per gallon)	$1.7283	$1.6665	$0.0618	3.68%	0.02%
Natural gas (per million BTU)	$8.3180	$7.9980	$0.3200	10.41%	-25.90%
Unleaded gasoline (per gallon)	$1.6371	$1.5850	$0.0521	14.70%	-4.26%

Palm, Nokia have some troubles

Shares of handheld-computer maker Palm (PALM, news, msgs) were down nearly 7.7% on the day after the company warned its second-quarter earnings would be lower than expected.Palm cited delays in rolling out its Treo 750 to the U.S. market. The company now expects earnings will be between 10 and 11 cents a share on revenue between $390 million and $395 million. Earlier, Palm had projected earnings of 15 to 18 cents with revenue between $430 million and $450 million.

Palm launched the Treo 750 in Europe in September and is expecting the e-mail cell phone to hit the U.S. early next quarter.

Separately, cell phone maker Nokia (NOK, news, msgs) said it is cutting its overall operating margin forecast for the next two years, blaming its Nokia Siemens Network operations. Nokia expects an operating margin of 15%, down from an earlier forecast of 17%.

The company said it expects world subscriptions to hit the 3 billion mark next year, a year earlier than it had planned.

Nokia and Siemens won European Union approval for a merger of their network units on Nov. 13. Nokia shares were down 11% at $20.09.

European energy merger

Scottish Power (SPI, news, msgs) accepted a friendly $22.5 billion offer from Spain's Iberdola, to create Europe's third-biggest utility. Iberdola offered $7.75 and 0.1646 new Iberdola shares for every Scottish Power share, which some analysts speculate is on the low end and could trigger a rival offer. The stock fell slightly in New York today.

The deal is another move to consolidate Europe's utility companies. Paris-based Suez (SZE, news, msgs) and Gaz de France have announced plans to create France's biggest utility, but the companies are seeing shareholder resistance to the price tag.

Scottish Power rejected an offer from Germany's E.On (EON, news, msgs) last year. E.On is now in a takeover battle with Spain's biggest power company, Endesa.

In March, Scottish Power completed the sale of its U.S. unit, PacifiCorp, to Warren Buffet's Berkshire Hathaway (BRK.A, news, msgs) for $5.1 billion in cash and $4.3 billion in debt.

A hit for EMI?

Shares of record company EMI Group (GB:EMI, news, msgs) jumped more than 10.5% in London today, after the company announced it had received a preliminary buyout bid. While the company didn’t identify who was making the offer, The Wall Street Journal identified the bidder as Permira Advisors of London. (Subscription required.)

EMI spoke with Warner Music Group (WMG, news, msgs) about a deal earlier this year. The talks broke down because of concern a deal could get regulatory approval from the European Union. EMI is the label for Coldplay, The Beastie Boys and Lenny Kravitz.

New York Times is downgraded

Shares of newspaper giant New York Times (NYT, news, msgs) were down 2.9% to $23.24 this afternoon after Citigroup downgraded the company to "sell" from "hold." Analyst William Bird cited the company's vulnerability to Internet-related pressures and noted its high stock price, saying there was little chance it could be sold. Bird cut his price target to $17 from $23.

Short hits from the markets -- 4 p.m.

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	4.905%	4.905%	0.00	-0.71%	23.09%
5-year Treasury note yield	4.503%	4.537%	-0.03	-1.83%	3.35%
10-year Treasury note yield	4.509%	4.538%	-0.03	-2.68%	2.59%
30-year Treasury bond yield	4.596%	4.618%	-0.02	-3.59%	1.08%
Currencies
U.S. Dollar Index	83.41	83.60	-0.19	-2.00%	-8.30%
British pound in dollars	$1.95	$1.94	0.02	2.44%	13.77%
Dollar in British pounds	£0.51	£0.52	0.00	-2.38%	-11.98%
Euro in dollars	$1.32	$1.31	0.01	3.50%	11.74%
Dollar in euros	€ 0.7572	€ 0.7611	0.00	-3.38%	-10.51%
Dollar in yen	¥116.05	¥116.10	-0.05	-0.77%	-1.54%
Commodities
Gold*	$637.30	$640.60	-$3.30	5.03%	22.82%
Copper*	$3.1380	$3.1875	-$0.05	-6.17%	45.18%
Silver*	$13.6200	$13.4900	$0.13	11.00%	53.21%
Crude oil (NYMEX) (per barrel)*	$60.99	$60.32	$0.67	3.85%	-0.08%

By Elizabeth Strott and Charley Blaine