Stocks sink on worries that economy is slowing

Posted: May 02, 2013

NEW YORK - Signs of a slowing economy dragged down the stock market Wednesday. Even the prospect of continued stimulus from the Federal Reserve didn't help.

Major market indexes fell by 0.9 percent, their worst decline in two weeks. Small-company stocks fell even more, 2.5 percent, as investors shunned risk. The yield on the benchmark U.S. government bond fell to its lowest of the year as investors sought safety.

Stocks opened lower and kept sagging throughout the day, hurt by reports of a slowdown in hiring and manufacturing last month. Discouraging earnings news from major U.S. companies also dragged the market lower.

The Dow Jones industrial average closed down 138.85 points to 14,700.95 points. Merck, the giant drug company, had one of the biggest falls in the Dow after reporting earnings that disappointed investors. The Dow had risen for four days straight.

The Standard & Poor's 500 index, a broader market measure, dropped 14.87 to 1,582.70. The Nasdaq composite index dropped 29.66 points, to 3,299.13. The Russell 2000 index, a gauge of small-company stocks, fell 23.25 points to 924.21.

The stock market was down even after the Federal Reserve stood by its easy-money policies after a two-day policy meeting.

The Fed is maintaining its $85 billion-a-month bond-buying program, begun in 2008, which aims to keep interest rates low to encourage borrowing, spending, and investing.

The Fed also raised concerns about the economy, noting that tax increases and spending cuts that kicked in this year are slowing growth. The central bank made clear that it could increase or decrease its bond purchases depending on the performance of the job market and inflation.

On Wednesday, a report showed that U.S. factory activity in April dropped to its slowest pace this year as manufacturers pulled back on hiring and cut stockpiles. Companies added just 119,000 jobs in April, the fewest in seven months, payroll processor ADP said.

Among big moves, home-security provider ADT fell $3, or 6.9 percent, to $40.64 after its profit didn't live up to analysts' hopes.

T-Mobile USA Inc., the combination of T-Mobile USA and MetroPCS, rose 96 cents, or 6.2 percent, to $16.52 on its first day of trading. Goldman Sachs analysts opened their coverage of the stock with a "buy" recommendation and a 12-month price target of $22, predicting that the company will benefit from further consolidation in the industry.

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