Stocks tumble on housing report

(CNNMoney.com) — Stocks gave back early gains Thursday after the government reported a smaller-than-expected rise in new home sales.

The Dow Jones industrial average (INDU) was down 37 points, or 0.5%, about 30 minuets into the session. The S&P 500 (SPX) lost 4 points, or 0.5%. The Nasdaq composite (COMP) slumped 0.9%, giving back 15 points.

Stocks sold off near the close of the previous session as bond yields and mortgage rates spiked, raising concerns that higher borrowing costs could stifle an economic recovery.

Economy: New home sales in April rose 0.3% at a seasonally adjusted annual rate of 352,000 from a revised rate of 351,000 the month before, according to government figures.

But the increase was smaller than expected, and the previous month’s figures were revised sharply lower. Economists surveyed by Briefing.com had expected a sales rate of 360,000. March sales were originally reported at a rate of 356,000.

Earlier, a report on weekly jobless claims showed a larger-than-expected decline, while the monthly report for durable goods orders showed a higher-than-expected increase.

Initial jobless claims fell to 623,00 in the week ended May 23, a decline of 13,000 from the revised figure for the prior week.

Claims were expected to have declined to 628,000, according to a consensus of economist opinion from Briefing.com.

Orders for durable goods jumped 1.9% in April, a larger increase than expected. Orders were expected to have risen 0.5% in April, according to the Briefing.com consensus, compared to a revised decline of 2.1% the prior month.

Bonds: The yield on the benchmark 10-year Treasury note slipped to 3.64% after surging to a 6-month high of 3.71% Wednesday. Bond prices and yields move in opposite directions.

Mortgage rates, which are pegged to Treasury yields,jumped in the most recent week. The average 30-year fixed mortgage rate rose to 5.45% in the week ended Wednesday from 5.24% last week.

Companies: Auto parts supplier Visteon (VSTN, Fortune 500) filed for bankruptcy protection for its U.S. operations. The company, which is a major supplier to Ford (F, Fortune 500), has been hit hard by the sharp decline in demand for cars.

Media powerhouse Time Warner (TWX, Fortune 500) announced that it would separate itself from online service company AOL. Time Warner said that AOL would be spun into a separate publicly traded company.

After the closing bell, personal computer maker Dell (DELL, Fortune 500) is expected to report first-quarter earnings of 23 cents per share, down from 38 cents per share a year ago.

GM (GM, Fortune 500) shares rose after the troubled automaker said major bondholders have accepted a revised deal to swap debt for equity. However, the deal does not mean that the company will avoid filing for bankruptcy, which could happen at the end of this week if certain other restructuring efforts fail.

Other markets: Stocks in Japan finished the session slightly higher. Markets in Hong Kong and China were closed for a holiday. European shares tumbled in midday trading.

In currency trading, the dollar rose versus the euro, but slipped against the yen and the British pound.

NYMEX crude oil for July delivery prices rose 55 cents a barrel to $64.01.

COMEX gold for August delivery rose $6.40 an ounce to $961.60.

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