Related News

Home » Business » Finance

Stocks lose ground on worries about economy's path

STOCKS had their fourth straight day of incremental moves yesterday as commodity prices slid and orders for big-ticket manufactured goods fell, injecting more economic uncertainty into the market.

Investors are uneasy but aren't giving up on stocks. The Dow Jones industrials lost only 26 points on yesterday and major indexes are still up about 11 percent since only mid-July. Analysts say the market's buoyancy after such a big gain is a welcome sign of stability, but also that more good news is needed for stocks to resume their climb.

For now, though, investors are finding more reasons for concern. The price of oil and raw materials fell after stocks tumbled in China on fears that the growth in that country's economy would slow. That could hurt demand for a range of commodities. A jump in U.S. crude inventories further weighed on the price of oil.

The Commerce Department said orders to U.S. factories for manufactured goods - those expected to last at least three years - fell an unexpectedly steep 2.5 percent in June. The slide reflected troubles in the auto industry and a drop in demand for commercial aircraft. It was the largest decrease in five months, and was worse than the 0.6 percent decrease analysts were expecting.

Lackluster demand at a government debt auction for the consecutive second day fanned worries that rising interest rates could hobble a recovery in the economy. That boded poorly for a big auction of 7-year Treasury notes on Thursday.

Traders are facing an intense seven-day run of economic data that will help shape views about how quickly the economy can pull out of the longest recession since World War II. On Thursday, weekly unemployment figures are due and a reading of the economy's overall output for the April-June quarter comes on Friday. Next week, reports are expected on manufacturing, housing, employment and the service industry.

Manny Weintraub, president of Integre Advisors in New York, said some good numbers could bring out more buyers becuase investors are betting on what the economy will look like in the near future, not what it looks like now.

"The market is a barometer and not a thermometer," Weintraub said. "As long as things are getting better the market can go up."

The Dow fell 26.00, or 0.3 percent, to 9,070.72. The broader Standard & Poor's 500 index fell 4.47, or 0.5 percent, to 975.15, while the Nasdaq composite index slid 7.75, or 0.4 percent, to 1,967.76.

On Tuesday, stocks finished mixed after several corporate earnings reports and the Conference Board's reading on consumer confidence fell short of expectations.

Energy and materials stocks fell after a drop in stocks in China. The main Shanghai index tumbled 5 percent on fears that China would try to keep its economy from heating up too quickly. A slowdown in China's economy would erode demand for a range of raw materials, including oil and metals.

Investors were also unnerved after U.S. crude inventories rose more than expected last week. The rise prompted worries that weakness in the economy was curbing demand for energy.

Occidental Petroleum Corp. fell US$2.21, or 3.1 percent, to US$69.48, while Schlumberger Ltd. fell US$2.11, or 3.9 percent, to US$52.49.

Light, sweet crude slid US$3.88 to settle at US$63.35 a barrel on the New York Mercantile Exchange.

Bond prices were mixed after a disappointing auction of US$39 billion in five-year notes. That raised fears that Washington will have to offer investors higher returns on debt, which can drive up borrowing costs on consumer loans like mortgages. The yield on the benchmark 10-year Treasury, which moves opposite its price, fell to 3.67 percent from 3.69 percent late Tuesday.

Investors took some comfort from a Federal Reserve report said that the economy is beginning to show signs of stabilizing in some parts of the country, bolstering hopes of a broader-based recovery this year.

The central bank's snapshot of economic conditions found that most of the Fed's 12 regions indicated either that the recession was easing or that economic activity had "begun to stabilize, albeit at a low level."

Investors have grown cautious after the surge that began July 13 when corporate earnings reports were stronger than expected.

Russell Croft, portfolio manager at Croft Leominster Investment Management in Baltimore, cautioned against reading too much into any one economic report.

"There's a good economic number and then there's a bad number and that's probably what you'd expect at this juncture of the recession," he said. "Hopefully it's two steps back and three steps forward."

Two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.3 billion shares compared with 1.2 billion traded Tuesday.

The Russell 2000 index of smaller companies fell 3.57, or 0.7 percent, to 548.38.


Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.

沪公网安备 31010602000204号

Email this to your friend