U.S. stock indexes closed lower Wednesday as economic worries returned to haunt Wall Street, leading to profit taking on recent market gains.
Factors depressing the market included a 2.5% drop in June durable goods orders, a retreat in commodities prices, disappointing demand shown at a $39 billion five-year Treasury note auction, Federal Reserve Beige Book data showing lingering economic weakness, and a 5% drop in Shanghai's equity market.
On Wednesday, the 30-stock Dow Jones industrial average finished lower by 26.00 points, or 0.29%, at 9,070.72. The broad Standard & Poor's 500-stock index was down 4.47 points, or 0.46%, to 975.15. The tech-heavy Nasdaq composite index shed 7.75 points, or 0.39%, to 1,967.76.
On the New York Stock Exchange, 18 stocks were lower in price for every 12 that advanced. Nasdaq breadth was 16-10 negative.
Treasuries were mixed. The dollar index was up after the skid in Chinese stocks. Gold futures were off.
Oil futures fell after the Energy Dept. reported crude oil inventories rose by a more-than-expected 5.1 million barrels in the week ended July 24. Also, the DOE reported
gasoline stocks fell 2.3 million barrels and distillate stocks rose 2.1 million barrels.
Microsoft (MSFT) and Yahoo (YHOO) announced an agreement under which Microsoft will power Yahoo's search while Yahoo will become the exclusive worldwide relationship sales force for both companies' premium search advertisers.
Yahoo shares fell 12% on the session, while Microsoft shares rose 1.5%.
PIMCO bond-market guru Bill Gross released his August Investment Outlook, in which he wrote that "an investor should remember that a journey to 3% nominal GDP means default/haircuts for assets on the upper end of the risk spectrum, as well as extremely low yielding returns for government and government-guaranteed assets at the bottom end. There is no investment potion for this new environment other than steady income-producing bond and equity investments in companies with strong balance sheets and high dividend yields, as well as selectively chosen emerging market commitments where nominal GDP growth prospects are tilted upward as opposed to gravitating to new lower norms."
Meanwhile Time Warner (TWX) profits sank 34% on AOL and lower ad revenues, and Sprint-Nextel's (S) second-quarter losses widened.
In economic news Wednesday, U.S. durable goods orders fell 2.5% in June, more than reversing the 1.3% increase in May (revised from 1.8%). April's 1.8% increase was also revised lower to 1.4%. Transportation orders dropped 12.8%, with orders excluding transportation rising 1.1%. Nondefense capital goods orders excluding aircraft rose 1.4%. Shipments dipped 0.2%. Inventories were down 0.9%. The inventory-shipment ratio fell back to 1.89 from a revised 1.91 (was 1.90). The data are weaker than expected, and that could keep a bid in Treasuries this morning.
The Mortgage Bankers Association's index of applications to purchase a home or refinance a loan increased 4.3% to 514.4 in the week ended July 10 from 493.1 in the prior week. The group's refinancing gauge jumped 18%, while the index of purchases fell 9.4%. Bloomberg News said today's report showed the mortgage bankers' refinancing gauge increased to 2,009.4 from the previous week's 1,707.7. The purchase index fell to 258.8 from a three-month high of 285.6 the prior week. Combined sales of existing and new homes climbed to a 5.1 million annual pace in May, the highest level so far this year.
The ABC News consumer comfort index rose three points to -47 in the week ended July 26 from -50 a week earlier. ABC said 9% of respondents expressed confidence in the economy, down from 10% the week before. Also, 44% of those polled said their own finances were in good standing, up from 43% in the prior week. In assessing the buying climate, 26% of respondents said it was good, up from 22% a week earlier.
The Fed's Beige Book survey of U.S. economic conditions was due out at 2:00 p.m. ET Wednesday. The report is likely to indicate the contraction in the economy continues to abate, according to S&P.
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