The Dow and U.S. stock market traded lower on Tuesday after government data showed housing starts tanked in December, highlighting extensive damage to the real estate sector since interest rates began to rise.

Dow Weakens – S&P 500 & Nasdaq Follow

All of Wall Street’s major indexes showed weakness through the early part of trading Tuesday, reflecting tepid pre-market conditions for Dow futures. The Dow Jones Industrial Average fell 67 points, or 0.3%. to 26,024.55. Less than half of the index’s 30 members traded lower, though big losses for Caterpillar Inc. (CAT) and Home Depot Inc. (HD) offset more modest gains elsewhere.

Shares of Home Depot were under pressure after the home-improvement retailer reported quarterly results that were weaker than expected. The company’s quarterly adjusted earnings per share came in at $2.09 compared to projections calling for $2.16. Revenue rose to $26.49 billion, lower than the $26.57 billion expected.

The broader S&P 500 Index dipped 0.1% to 2,795.53. Most of the 11 primary sectors tracked by Standard & Poor’s traded lower, with utilities leading the declines. Materials and consumer discretionary shares were also under pressure. Information technology was the lone sector to report gains.

Still, the Nasdaq Composite Index was unable to rally. The tech-laden average fell 0.2% to 7,540.95.

The U.S. stock market advanced on Monday but finished well off session highs. Volatility climbed nearly 10% during the session, potentially signaling rocky trading conditions ahead. The CBOE VIX Volatility Index peaked at 15.28 on Tuesday, its highest in almost two weeks. VIX last week closed at its lowest level in over four-and-a-half months.

America’s Troubled Housing Sector

The U.S. housing sector continued to struggle at the end of 2018, an ominous sign for an economy that relies heavily on consumer spending and healthy demand for residential property. The Commerce Department reported Tuesday that housing starts plunged 11.2% in December to a seasonally adjusted 1.078 million-unit pace. Analysts in a median estimate had called for a slight increase. Both single and multifamily dwellings struggled.

Building permits, a proxy for future construction plans, edged up 0.3% to a seasonally adjusted annual rate of 1.326 million, official data showed.

This isn’t the first sign of weakness for the real estate sector. Sales on new and previously-owned homes have languished for several years as affordability challenges weakened demand, especially among first-time buyers. Rising interest rates and higher valuations on existing property have combined to put a damper on resale activity. Last month, the National Association of Realtors (NAR) said existing home sales plunged in December to the lowest in three years.

Declining mortgage rates have provided some reprieve to prospective buyers. Last week, the 30-year fixed mortgage averaged 4.35%, down from 4.37% during the previous week, according to Freddie Mac. Still, mortgage rates are well above where they were just a few years ago.

Featured image courtesy of Shutterstock. Chart via TradingView.