Signs of a slowing economy dragged down the stock market on Wednesday. Even the prospect of continued stimulus from the Federal Reserve did not help.
The three major market indexes fell by 0.9 percent. Small-company stocks fell even more as investors shunned risk. The yield on the Treasury’s 10-year note fell to its lowest point this year as investors moved their money into government securities.
Stocks sagged throughout the day, hurt by reports of a slowdown in hiring and manufacturing last month. Discouraging earnings announcements from major companies also did not help.
“Investors are going to be rattled by these numbers,” said Colleen Supran, a principal at Bingham, Osborn Scarborough. She expects stock market swings to increase after the early gains of the year.
The Dow Jones industrial average closed down 138.85 points, at 14,700.95 points. Merck, the giant drug company, had one of the biggest falls in the Dow after reporting earnings that disappointed investors.
The Standard Poor’s 500-stock index lost 14.87 points to 1,582.70. The Nasdaq composite index declined 29.66 points, to 3,299.13.
The stock market declined even though the Federal Reserve stood by its economic stimulus campaign after a two-day policy meeting. The Fed is maintaining its program to buy $85 billion in Treasury and mortgage-backed securities a month in an effort to keep interest rates low to encourage borrowing, spending and investing.
The Fed also raised concerns about the economy, noting that tax increases and spending cuts that kicked in this year were slowing growth.
“If you get a market that is purely built on free money, as opposed to solid fundamentals, investors should take pause,” said John Lynch, chief regional investment officer at Wells Fargo.
The Fed’s program has been one of the factors behind the stock market’s rally this year. But the market has stumbled in recent weeks after several reports suggested the economy might be weakening.
On Wednesday, a report showed that factory activity in April dropped to its slowest pace this year as manufacturers pulled back on hiring and cut stockpiles. Companies added just 119,000 jobs in April, the fewest in seven months, according to the ADP National Employment Report. The government will report on April employment on Friday, and the economy is expected to have added 145,000 jobs.
Company earnings drew investors’ attention.
Merck fell $1.31, or 2.8 percent, to $45.69 after cutting its 2013 profit forecast. The company said competition from generic versions of its drugs and unfavorable exchange rates hurt profit.
MasterCard eased $13.11, or 2.4 percent, to $539.80 after the payments processing company reported that revenue missed the expectations of financial analysts who cover the company.
About 70 percent of the companies that have reported earnings have topped the forecasts of Wall Street analysts, according to SP Capital IQ. Revenue has disappointed, though, with about 60 percent of companies falling short. That suggests companies are raising profits through cutting costs rather than increasing revenue.
In government bond trading, the 10-year Treasury note rose 12/32, to 103 10/32, pushing its yield down to 1.63 percent from 1.67 percent.
Article source: http://www.nytimes.com/2013/05/02/business/daily-stock-market-activity.html?partner=rss&emc=rss