Dow closes the day at 10,497, down 46 points.
NEW YORK (AP) — Investors cashed in some of their recent gains
Wednesday after the Federal Reserve gave them more confirmation
that the economic recovery is slowing.
The Dow Jones industrial average fell almost 40 points after the
Fed released its regional survey of the economy, a report known as
the “beige book.” The Fed said economic growth has been steady
during the summer in Cleveland and Kansas City, but has slowed in
Atlanta and Chicago. The central bank described economic activity
elsewhere as modest.
The report had some sobering news about manufacturing, which had
been one of the strongest parts of the economy. While manufacturing
expanded in most of the Fed’s 12 regions, about half — New York,
Cleveland, Kansas City, Chicago, Atlanta and Richmond — said
manufacturing had “slowed” or “leveled off.”
Investors weren’t surprised by the Fed report, but they also didn’t
like hearing their own downbeat assessment of the economy confirmed
by the central bank.
“It does reiterate that the economy is not bouncing back as much as
we would hope,” Ryan Detrick, senior technical strategist chairman
of Schaeffer’s Investment Research, said of the beige book.
But Detrick also said the report gave investors an excuse to cash
in some of their gains from the market’s rally late last week and
early this week. The Dow rose almost 420 points in four days as
investors bought stocks in response to companies’ strong
second-quarter earnings and upbeat forecasts for the rest of the
year.
The Fed survey followed a disappointing Commerce Department durable
goods orders report early in the day. Orders for durable goods,
which are expected to last at least three years, fell 1 percent in
June. Economists expected a 1 percent gain.
Investors have been trying in recent weeks to balance strong
earnings and corporate outlooks with economic data that isn’t as
encouraging. A drop in consumer confidence Tuesday helped push
stocks mostly lower although another batch of robust earnings
reports came out.
“The biggest issue the market is looking at is whether the soft
patch in economic data is likely to continue,” said Michael
Sheldon, chief market strategist RDM Financial Group. “Investors
wonder if the strong earnings reports that we have seen are more
backwards as opposed to forwards looking.”
The Dow fell 39.81, or 0.4 percent, to 10,497.88. The Standard &
Poor’s 500 index fell 7.71, or 0.7 percent, to 1,106.13, while the
Nasdaq composite index fell 23.69, or 1 percent, to 2,264.56.
Two stocks fell for every one that rose on the New York Stock
Exchange, where consolidated volume came to 4.1 billion shares
versus 4.7 billion shares Tuesday.
Volume has been light even by summer standards, which has added to
the day-to-day volatility. Many investors have been staying out of
the market while they try to get a clearer sense of how the economy
is faring.
Treasury prices, which get a boost from bad economic news, rose
after the beige book was released. That sent interest rates lower.
The yield on the 10-year Treasury note, which moves opposite its
price, fell to 2.99 percent from 3.05 percent compared with late
Tuesday. That yield helps set interest rates on mortgages and other
consumer loans.
David Hefty, CEO of Cornerstone Wealth Management, said many
investors are waiting for the government’s report on gross domestic
product, the broadest measure of how the economy is doing, before
making any big investing moves.
The report will be issued before trading opens on Friday.
Economists surveyed by Thomson Reuters are forecasting that the GDP
rose at an annual rate 2.3 percent from April-June. That would be
down from the first quarter’s 2.7 percent.
Earnings reports were mixed Wednesday. Boeing Co. said its profit
slipped from a year ago, but results still topped expectations. The
airplane maker also didn’t adjust its outlook.
Sprint Nextel Corp. said it added subscribers to its network for
the first time in three years during the second quarter as it
improves customer service and retention. Its revenue slightly
topped forecasts.
ConocoPhillips profit more than doubled as refining margins
improved and oil prices rose.
Sprint Nextel rose 1 cent to $4.84. ConocoPhillips was unchanged at
$54.44. Boeing fell $1.30 to $67.32.
Overseas, Britain’s FTSE 100 fell 0.9 percent, Germany’s DAX index
dropped 0.5 percent, and France’s CAC-40 rose 0.1 percent. Japan’s
Nikkei stock average jumped 2.7 percent.
