Stocks fall on weak factory report

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NEW YORK -- Stocks pulled back Wednesday after the government's February durable goods report injected more pessimism about the economy into the market. The Dow Jones industrial average fell more than 130 points.

The Commerce Department said durable goods orders fell 1.7% last month, the second straight monthly decline in the economic indicator. The market had expected orders to go up.

The disappointing report comes a day after the broader stock market extended its gains following two sessions of sharp advances. Considering that the blue-chip Dow has risen more than 425 points in the past three sessions, a pullback does not come as a surprise, particularly after the weak durable goods numbers.

The Commerce Department also reported that sales of new homes fell in February for a fourth straight month as the housing slump continues. The 1.8% decline, however, was a bit better than economists surveyed by Thomson Financial/IFR had anticipated.

What remains unclear, however, is how much Wednesday's economic data will end up eroding the market's recent rally.

"Part of the reason we're down is the negative data on the heels of fresh optimism, and a combination of that typically leads to selling," said Todd Salamone, director of trading at Schaeffer's Investment Research. "There is also some window dressing going on with the quarter winding down, and we also have earnings reports coming in just a few weeks."

In late morning trading, the Dow fell 134.00, or 1.07%, to 12,398.60.

Broader stock indicators also retreated. The Standard & Poor's 500 index fell 13.70, or 1.01%, to 1,339.29, while the Nasdaq composite index fell 28.20, or 1.20%, to 2,312.85.

Bond prices rose as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.46% from 3.51% late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Oil prices soared after the Energy Department said the nation's inventory of crude oil, gasoline and distillate fuels was lower than expected last week. Light, sweet crude rose $3.26 to $104.48 a barrel on the New York Mercantile Exchange.

Corporate news appeared to weigh on some investors. Private equity firms leading a $19.5 billion buyout of Clear Channel Communications Inc. were having difficulty reaching terms with the banks committed to financing the deal and the plan was close to collapse, according to a report by The Wall Street Journal.

Meanwhile, Motorola Inc. said it plans to split its troubled handset business from other operations, creating two separate, publicly traded companies. Shares of the handset maker rose 9 cents to $9.85.

Electronic parts manufacturer Jabil Circuit Inc. posted a fiscal second-quarter loss and warned its third-quarter results will fall short of Wall Street's expectations. The disappointing results caused shares to plunge $2, or 17.6%, to $9.38.

The Russell 2000 index of smaller companies fell 7.65, or 1.08%, to 697.62.

Declining issues led advancers by 3 to 1 on the New York Stock Exchange, where volume came to 343.2 million.

Overseas, Japan's Nikkei stock average fell 0.30%. In afternoon trading, Britain's FTSE 100 fell 0.49%, Germany's DAX index fell 0.30%, and France's CAC-40 was off 0.64%.
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