Stocks tumbled Thursday after a larger-than-expected drop in durable-goods orders raised new questions about the economy and corporate profits...
NEW YORK — Stocks tumbled Thursday after a larger-than-expected drop in durable-goods orders raised new questions about the economy and corporate profits.
The Dow fell 115.03 to 10,229.95.
Microsoft, one of the 30 Dow stocks, slipped 26 cents to close at $24.85 a share before it released its earnings. In after-hours trading, shares were down an additional 40 cents on concern for its sales outlook.
Boeing, also a Dow stock, fell $1.05 to $64.05.
Broader stock indicators also lost ground. The Standard & Poor’s 500 index dropped 12.48 to 1,178.90, and the Nasdaq composite index lost 36.24 to 2,063.81.
Wall Street saw the Commerce Department’s report on durable goods — big-ticket items designed to last at least three years — as another in a line of signs that consumer spending could dry up and further harm an already decelerating economy. Orders for durable goods fell 2.1 percent in September, far more than the 1.5 percent drop economists had forecast.
“We’re starting to see some slowing in the economy,” said Dirk van Dijk, director of research at Zacks Investment Research. “I don’t think we’re going into a recession, but [Federal Reserve Chairman-nominee Ben] Bernanke is going to have his hands full.”
Investors also remained concerned that the Fed, in raising interest rates to quash inflation, will further slow economic growth and company earnings by making capital more expensive for companies looking to expand. The Fed next meets Tuesday and is widely expected to raise the nation’s benchmark lending rate to 4 percent.
Crude-oil futures moved higher. A barrel of light crude settled at $61.09, up 43 cents, on the New York Mercantile Exchange.
In other economic news, new-home sales rebounded at a faster-than-expected pace in September, rising 2.1 percent. However, new-home sales are well below the year’s highs and the median price of new homes sold last month fell by 5.7 percent.
Traders are watching home sales carefully, worried that a decline in housing prices might curb consumer spending. Outgoing Federal Reserve Chairman Alan Greenspan has said borrowing against homes added $600 billion to consumers’ spending power last year. A sustained decline in home prices would “shut down the housing ATM, which is massive,” van Dijk said.
Even if home sales stay strong, investors will continue to worry about consumer spending. In a report Wednesday, Lehman Brothers called rising home prices, low mortgage rates and declining energy prices “props to consumer spending” that could weaken or collapse at some point in 2006.
A stop to the Fed’s policy of consistent interest-rate increases could prevent that, but much of the volatility in the market over the past two weeks comes as investors debate whether the Fed is ready to stop raising rates or will keep going as still-high energy costs stoke inflation.
“Volatility is finally picking up, and that’s because of the uncertainties you’re seeing not only over interest rates, but energy prices as well,” said Chris Wiles, managing senior director at the Allegiant Funds.