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Weak economic data puts stock market rally on hold
NEW YORK -- Wall Street's summer rally is on hold as reminders of the economy's weakness give investors reason to take some profits.
Stocks fell moderately Wednesday after an unpleasant reading on the service sector added to investors' growing anxiety over the Labor Department's jobs report, which is due Friday morning. Some pullback is to be expected after a huge rally that sent the Dow Jones industrials and the Standard & Poor's 500 index up 14% in just 16 days.
The Institute for Supply Management said business at service companies was weaker than expected last month. The trade group's services index, a measure of the health of retail, financial services, transportation and health care companies, fell to 46.4 from 47 in June, marking the 10th straight month of declines. A reading below 50 indicates the sector is shrinking.
The disappointing news offset a more upbeat report from the Commerce Department, which said factory orders rose in June for the fourth time in five months. The 0.4% increase came after a 1.1% increase in May. Economists had been expecting a decline of 1%.
Though there have been recent signs of improvement in manufacturing and housing, the market is still worried that rising unemployment will restrain consumers from spending and hinder the economy's recovery. Analysts said Wednesday's slide was natural after such a big jump, especially with caution running high ahead of the jobs report.
"The market has just had a pretty good advance and is looking for a reason for a pullback," said Henry Herrmann, CEO of investment management firm Waddell & Reed.
According to preliminary calculations, the Dow fell 39.22, or 0.4%, to 9,280.97. The S&P 500 index fell 2.95, or 0.3%, to 1,002.70, while the Nasdaq composite index fell 18.26, or 0.9%, to 1,993.05.
About three stocks fell for every two that rose on the New York Mercantile Exchange, where volume came to 1 billion shares.
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