Stocks decline on weak economic data

Stocks decline on weak economic data

By MADLEN READ, AP Business Writer 9 minutes ago

NEW YORK - Stocks pulled back Wednesday after a decline in February's durable goods orders injected the market with more pessimism about the economy. The Dow Jones industrial average fell more than 100 points.
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Investors sold off on a Commerce Department showing that orders of durable goods fell 1.7 percent in February, the indicator's second straight monthly decline. The market had expected orders to rebound.

The disappointing report comes a day after the broader stock market extended its gains following two sessions of sharp advances. Considering that the Dow has risen more than 425 points in the past three sessions, a pullback does not come as a surprise, particularly after the weak durable goods numbers.

Investors also weighed a report from the Commerce Department showing sales of new homes fell in February for a fourth straight month as the housing slump continues. The 1.8 percent decline was a bit better than economists surveyed by Thomson Financial/IFR had anticipated, but still dragged activity down to a 13-year low.

It remains unclear much of Wednesday's economic data, and reports later this week, will end up eroding the market's recent rally.

"I think the market has done a decent job of trying to find a bottom in the last few days, and that's certainly an encouraging sign," said David Joy, chief market strategist at Ameriprise Financial Inc.'s RiverSource Investments. "But I don't think there is by any means a general re-emergence of confidence in this market."

In early afternoon trading, the Dow fell 112.59, or 0.90 percent, to 12,420.01.

Broader stock indicators also retreated. The Standard & Poor's 500 index fell 12.09, or 0.89 percent, to 1,340.90, while the Nasdaq composite index fell 26.33, or 1.12 percent, to 2,314.72.

"Part of the reason we're down is the negative data on the heels of fresh optimism, and a combination of that typically leads to selling," said Todd Salamone, director of trading at Schaeffer's Investment Research. "There is also some window dressing going on with the quarter winding down, and we also have earnings reports coming in just a few weeks."

Bond prices rose as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.48 percent from 3.51 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Oil prices soared after the Energy Department said the nation's inventory of crude oil, gasoline and distillate fuels was lower than expected last week. Light, sweet crude rose $4.20 to $105.42 a barrel on the New York Mercantile Exchange.

Financial stocks fell after Treasury Secretary Henry Paulson said the government should impose more regulation on the nation's investment banks. In a speech to the U.S. Chamber of Commerce, Paulson said the Bush administration will soon release a plan to promote a smoother functioning of financial markets.

The sector was also one of the biggest drags on the market after Oppenheimer & Co. analyst Meredith Whitney lowered her first-quarter profit forecasts for the nation's top four commercial banks. Citigroup Inc., the nation's largest bank, fell $1.25, or 5.4 percent, to $22.16

Corporate news appeared to weigh on some investors. Private equity firms leading a $19.5 billion buyout of Clear Channel Communications Inc. were having difficulty reaching terms with the banks committed to financing the deal and the plan was close to collapse, according to a report by The Wall Street Journal.

Meanwhile, Motorola Inc. said it plans to split its troubled handset business from other operations, creating two separate, publicly traded companies. Shares of the handset maker rose 9 cents to $9.85.

Electronic parts manufacturer Jabil Circuit Inc. posted a fiscal second-quarter loss and warned its third-quarter results will fall short of Wall Street's expectations. The disappointing results caused shares to plunge $1.94, or 17 percent, to $9.44.

The Russell 2000 index of smaller companies fell 7.30, or 1.04 percent, to 697.97.

Declining issues led advancers by 2 to 1 on the New York Stock Exchange, where volume came to 691.7 million.

Overseas, Japan's Nikkei stock average fell 0.30 percent. In afternoon trading, Britain's FTSE 100 fell 0.46 percent, Germany's DAX index fell 0.58 percent, and France's CAC-40 was off 0.70 percent.