Stocks fall after worse-than-expected-data
NEW YORK -- Investors sent stocks lower Wednesday after factory orders and services data came in below expectations, signaling that economic conditions remain tough.
The decline broke a four-day advance, and many analysts said a pullback was due after the strong rise since last week.
At the close of trading, the Dow Jones industrial average fell 63, or 0.7%, to 8,678. The Standard & Poor's 500 index was down 13 points, or 1.3%, at 932. The Nasdaq composite index was down 11 points, or 0.6%, at 1,826.
The Commerce Department said factory orders rose 0.7% in April, the second gain in the past three months, but the increase fell short of analysts' expectations.
Also, a trade group reported that the services sector shrank in May at the slowest pace since October. However, that indicator also came in below economists' estimates and marked the eighth straight monthly decline.
Many analysts warn that the market needs to see real signs of growth before it can move much higher.
"We do believe that the market expectations are shifting from simple survival to sustainability," said Alan Gayle, senior investment strategist at RidgeWorth Capital Management.
Gayle said he began increasing his stock holdings back in March, when the market began rallying off of 12-year lows, on signs that economic data was becoming "less bad." But, he added, "to make an even stronger commitment less bad is not good enough."
Meanwhile, comments from Federal Reserve Chairman Ben Bernanke in front of Congress did little to reassure the market. Bernanke warned that rising debt was contributing to a spike in longer-term interest rates, and it was time to rein in deficits.
In recent months, investors have been taking their cues largely from economic reports, searching for confirmation that the recession will end some time this year. A slate of upbeat reports this week on manufacturing, consumer spending and home sales have helped send the market higher.
On Tuesday, stocks extended a four-day winning streak with modest gains following an unexpectedly big spike in pending home sales — the latest sign that the battered housing market is starting to turn around.
Luxury home builder Toll Brothers said Wednesday it has begun to see signs that buyers are re-entering the new home market. Still, the company reported a slightly bigger-than-expected loss of $83.2 million for its fiscal second quarter as it continued to reduce the value of land and unsold homes on its books.
Further tests of the market's resilience will come later this week. Retailers will report May sales results on Thursday, while on Friday the Labor Department will give its monthly jobs report — one of the most closely watched indicators of the economy's health.
Interest rates on long-term Treasuries fell further early Wednesday after surging last week. The yield on the 10-year Treasury note, which is used as a benchmark for home mortgages and other consumer loans, slipped to 3.57% from 3.62% late Tuesday.
The dollar moved higher against the euro and the British pound, while gold prices fell.
Overseas, Japan's Nikkei stock average added 0.4%. In European trading, Britain's FTSE 100 fell 1.9%, Germany's DAX index was down 0.6%, and France's CAC-40 fell 1.2%.
Contributing: Reuters