A surprisingly weak reading on the manufacturing sector sent stocks mostly lower yesterday as investors feared that the economy has indeed...
NEW YORK — A surprisingly weak reading on the manufacturing sector sent stocks mostly lower yesterday as investors feared that the economy has indeed run into a soft patch. The report overshadowed an improvement in consumers’ view of economic conditions.
The Dow Jones industrial average fell 75.07 to close at 10,467.48.
Microsoft, one of the 30 Dow stocks, declined 27 cents to close at $25.80 a share. Boeing, also a Dow stock, gained 88 cents to $63.90, a 52-week high.
Broader stock indicators also fell. The Standard & Poor’s 500 index closed down 7.12 at 1,191.66 and the Nasdaq composite index fell 7.51 at 2,068.22.
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Investors were disappointed when the Purchasing Management Association of Chicago reported that its index of business activity in the Midwest area fell to 54.1 last month from 65.6 in April. In April, the index had fallen from 69.2 in March. A reading above 50 indicates expansion in the manufacturing sector, while a number below 50 indicates contraction.
The Chicago indicator is a closely watched barometer of manufacturing activity and is considered a precursor of the national assessment to be issued by the Institute of Supply Management today.
The news outweighed the positive effect from the Conference Board’s consumer confidence index. That index rose to 102.2 last month from a revised 97.5 in April, above the 96 analysts expected.
Wall Street has been unable to shake concerns that the recovery is faltering just as the Federal Reserve holds to its policy of raising interest rates. This week’s indicators, which also include the government’s employment report for last month, due out Friday, are reviving some of the market’s uneasiness.
“We’ve seen a good run in the market, and now it’s pausing a little bit,” said Scott Jacobson, chief investment strategist at Jefferies. “The debate now is how far the Fed will go. Will the Fed drive the economy into a slow patch?”
Scott Wren senior equity strategist A.G. Edwards & Sons in St. Louis said investors are still struggling with questions about how much the economy will slow, and what effect that may have on the market.
“Typically at this point in the cycle investors seek clarity on inflation and economic growth,” Wren said. “As you transition from higher growth and low inflation to slower growth and higher inflation, typically the indicators remain mixed, which is what we’re seeing.”
The dollar continued to rally against the euro, hitting its highest level in almost eight months after France rejected the European Union constitution over the weekend. The euro dropped as low as $1.2312 before recovering in overseas trading.
The higher dollar as well as the weaker outlook on manufacturing helped push the 10-year Treasury bond higher, pushing its yield briefly below the psychological barrier of 4.00 percent for the first time since early February.