Stocks fall on jitters about pace of recovery; drop in durable goods orders fans worries

Stocks slide on worries about economy’s path

NEW YORK — The stock market is giving up more momentum from its latest rally as new worries about the economy pop up.

Stocks slid Wednesday as traders ran down a new list of concerns: Commodity prices slumped on fears that demand will fall, orders for big-ticket manufactured goods dropped more than expected last month, and demand was weak at an auction for government debt.

The Dow Jones industrial average fell 55 points late in the final stretch of trading.

The market’s July rally has been on hold since Friday as investors look for clues about the economy’s direction. The latest news left the market with only more questions.

The price of oil and raw materials fell after stocks tumbled in China on fears that the growth in the country’s economy would slow. That could hurt demand for a range of commodities. A jump in U.S. crude inventories last week added to the unease.

The Commerce Department said orders to U.S. factories for manufactured goods — those expected to last at least three years — fell an unexpectedly steep 2.5 percent in June, the latest sign that the economy could remain troubled for some time.

The drop reflected troubles in the auto industry and a sharp decline in demand for commercial aircraft. It was the largest slide in five months, and economists were expecting a decrease of 0.6 percent.

Russell Croft, portfolio manager at Croft Leominster Investment Management in Baltimore, cautioned against reading too much into any one economic number because he expects readings will continue to come in mixed as the economy begins to recover.

“There’s a good economic number and then there’s a bad number and that’s probably what you’d expect at this juncture of the recession,” he said. “Hopefully it’s two steps back and three steps forward.”

Stocks weakened further in the early afternoon after a government auction for five-year notes came in weaker than expected. That raised fears that Washington will have to offer investors higher returns on debt, which can drive up borrowing costs on consumer loans like mortgages.

In late afternoon trading, Dow fell 57.74, or 0.6 percent, to 9,038.98. The broader Standard & Poor’s 500 index fell 7.96, or 0.8 percent, to 971.66, while the Nasdaq composite index slid 11.72, or 0.6 percent, to 1,963.79.

On Tuesday, stocks finished mixed after several corporate earnings reports and the Conference Board’s reading on consumer confidence fell short of expectations.

Bond prices were mixed after a disappointing auction of $39 billion in five-year notes. The yield on the benchmark 10-year Treasury, which moves opposite its price, fell to 3.67 percent from 3.69 percent late Tuesday.

Energy company stocks dragged on the overall market after crude inventories rose more than expected last week, according to a weekly Energy Department report. The rise prompted worries that weakness in the economy was curbing demand for energy.

Occidental Petroleum Corp. fell $2.63, or 3.7 percent, to $69.06, while Schlumberger Ltd. fell $2.21, or 4.1 percent, to $52.39.

Light, sweet crude fell $3.88 to settle at $63.35 a barrel on the New York Mercantile Exchange.

Energy and materials stocks began the day lower after a drop in stocks in China. The main Shanghai index tumbled 5 percent on fears that China would try to keep its economy from heating up too quickly.

A slowdown in China’s economy would erode demand for a range of raw materials, including oil and metals.

In corporate news, Microsoft Corp. and Yahoo Inc. announced a 10-year deal that gives Microsoft access to the Internet’s second-largest search engine audience. Microsoft rose 22 cents to $23.69, while Yahoo fell $2.06, or 12 percent, to $15.16.

Investors have grown cautious after a two-week surge of 11 percent in major stock indexes that began when earnings reports were stronger than expected. A handful of disappointing earnings reports earlier in the week reminded investors that an economic recovery may still be far off.

Stocks were little changed after the Federal Reserve said that the economy is beginning to show signs of stabilizing in some parts of the country, bolstering hopes of a broader-based recovery this year.

The central bank’s snapshot of economic conditions found that most of the Fed’s 12 regions indicated either that the recession was easing or that economic activity had “begun to stabilize, albeit at a low level.”

About two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 824.9 million shares compared with 925.3 million traded at the same point Tuesday.

The Russell 2000 index of smaller companies fell 3.60, or 0.7 percent, to 548.35.

The dollar was mixed against other major currencies, while gold prices fell.

Overseas, Britain’s FTSE 100 rose 0.4 percent, Germany’s DAX index rose 1.9 percent, and France’s CAC-40 advanced 1 percent. Japan’s Nikkei stock average rose 0.3 percent. The benchmark Shanghai Composite Index fell 5 percent.