Stocks fall amid weak economic data
NEW YORK -- Wall Street's summer rally is on hold after investors got some unpleasant news about the health of the service sector.
The Institute for Supply Management reported Wednesday that 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%.
Still, some pullback was to be expected in the stock market after a huge rally that sent stocks up 14% in just 16 days. Investors are also more cautious as the release of the Labor Department's July employment report approaches. The report is due out Friday morning.
"We could see a little bit of profit taking over the next few days based on the fact that it is going to take some time before the jobs market really starts to improve," said Michael Sheldon, chief market strategist at RDM Financial.
Meanwhile, an earnings report from Procter & Gamble pg provided further evidence that Americans continue to feel the strain of a weak economy. The maker of such consumer products as Pampers diapers and Tide detergent said its fourth-quarter profit fell 18% as consumers reined in their spending. The results narrowly beat expectations.
The financial health of Americans is crucial to lifting the economy out of recession, as consumer spending accounts for about 70% of all U.S. economic activity.
Though the earnings and economic news continues to be fairly upbeat, investors are wary of taking the market too high too quickly and analysts have been expecting stocks to drift after such a big move.
Overseas markets have been mixed. European indexes posted modest gains after earlier losses in Asia. Bailed-out British bank Lloyds Banking Group said most of its bad loans have been accounted for even as it reported a staggering $5.3 billion loss for the first half of the year.
In afternoon trading, Britain's FTSE 100 added 0.4%, Germany's DAX index was up 0.3%, and France's CAC-40 rose 0.7%.
Earlier Wednesday, Japan's Nikkei stock average closed down 1.2% and Hong Kong's Hang Seng index fell 1.5%.