Weak economic reports send stock market lower

Posted: April 05, 2013

NEW YORK - Weak reports on hiring and service industries sent the stock market sharply lower Wednesday.

The Dow Jones industrial average fell 111.66 points, or 0.76 percent, to close at 14,550.35, its worst decline since Feb. 25. The Standard & Poor's 500 index dropped 16.56 points, or 1.05 percent, to 1,553.69. Both indexes had closed at record highs the day before.

The Nasdaq composite fell 36.26 points, or 1.11 percent, to 3,218.60.

The market started 2013 with a rally as investors became more optimistic about the U.S. economy, especially housing and jobs. Wednesday's disappointing reports came two days after news that manufacturing growth slowed unexpectedly in March.

Losses were widespread: All 10 industry groups in the S&P 500 fell. Banks and energy stocks had the worst losses, 1.7 percent and 1.6 percent. Utilities, which investors hold when they want to play it safe, fell the least, 0.3 percent.

"The market is overdue for a correction," said Joe Saluzzi at Themis Trading. "I don't think that the economy supports this type of a rally."

Signs of investor skittishness appeared across a number of different markets. Commodities slumped. Crude oil dropped $2.74, or 2.8 percent, to close at $94.45 a barrel, and industrial metals like copper fell.

The yield on the 10-year Treasury note fell to 1.81 percent from 1.86 percent, the lowest level for the benchmark rate since January.

The decline means investors are moving money into low-risk U.S. government debt.

The Russell 2000 index, which tracks small-company stocks, fell for a third straight day, dropping 1.7 percent. It's now down 3.5 percent so far this week, far worse than the declines in the Dow (0.2 percent) and the S&P (1 percent) - another signal investors may be more bearish.

The Dow Jones transportation average, an index of 20 stocks including Delta Air Lines, FedEx, and UPS, fell more than 1 percent for a third straight day. The index, regarded as a leading indicator for broader market indexes as well as the economy, has fallen 3.9 percent this week, after surging 17.9 percent in the first quarter.

U.S. service companies kept growing at a solid pace in March, but the expansion was less than economists were expecting. The Institute for Supply Management's index of service companies fell to 54.4 from 56 a month earlier. The report was the weakest in seven months.

Separately, payrolls processor ADP reported U.S. employers added 158,000 jobs last month, down from February's gain of 237,000. The ADP report is seen as a preview for the government's broader survey, which is due out Friday.

The slowdown in hiring was the result, in part, of construction firms holding back on adding employees. That sent home builders' stocks lower. PulteGroup fell 85 cents, or 4.3 percent, to $19.01. D.R. Horton dropped 57 cents to $22.84.

Zynga rose 46 cents, or 15 percent, to $3.53, after it said two online casino games would debut in the United Kingdom.

Abercrombie & Fitch rose $1.74, or 3.8 percent, to $47.20, making it the biggest percentage gainer in the S&P 500. The company said Tuesday it planned to expand internationally and emphasize cost control.

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