Manufacturing data send stocks sliding
NEW YORK » Wall Street fell sharply yesterday after the Philadelphia Federal Reserve surprised investors by announcing that its broadest measure of manufacturing activity fell to a negative reading for the first time since April 2003, renewing investor fears that the economy could be cooling too quickly.
The Philadelphia Fed said its index of current activity fell from 18.5 in August to negative 0.4 this month. The regional bank said indicators for general activity, new orders and shipments fell substantially from August and suggested no growth for September.
The pullback after Wednesday's big stock rally illustrates how sensitive Wall Street remains to any news that might squelch hopes of a gradual economic slowdown. Investors are concerned the Federal Reserve has perhaps slowed the economy too quickly as it sought to contain inflation. The Fed raised interest rates 17 consecutive times over two years before leaving them unchanged for the second straight time Wednesday.
Earlier, the Conference Board said its index of leading indicators fell in August for the second straight month. The Conference Board said the index, considered a good gauge of future economic activity, fell 0.2 percent to 137.6 last month, in line with analysts' expectations. The index also fell 0.2 percent in July after edging up 0.1 percent in June.
"As long as we are data-dependent, the market is going to be vulnerable to some significant swings," said Alan Gayle, senior investment strategist and director of asset allocation for Trusco Capital Management.
The Dow Jones industrial average fell 79.96, or 0.69 percent, to 11,533.23. Early in the session, the Dow's level had put it little more than 100 points away from its all-time high of 11,722.98 reached in January 2000.
Broader stock indicators also fell. The Standard & Poor's 500 index, which reached a five and a half year high Wednesday, fell 7.15, or 0.54 percent, to 1,318.03 and the Nasdaq composite index fell 15.14, or 0.67 percent, to 2,237.75.
Bonds rose sharply, with the yield on the benchmark 10-year Treasury note falling to 4.64 percent from 4.73 percent late Wednesday as investors theorized that the Fed would keep interest rates stable. The dollar was mixed against other major currencies, while gold prices rose.
Oil, which has helped buoy the market with falling prices in recent weeks, rose 85 cents to $61.59 a barrel on the New York Mercantile Exchange.