Stocks drop in early trading after ratings agency warns about Portugal’s debt

Stocks fall early after Portugal’s rating cut

NEW YORK — Stocks fell Wednesday morning on renewed concerns about European debt problems after a major ratings agency slashed its view on Portugal.

A report showing continued growth in the U.S. manufacturing sector had little effect on trading. Investors are also awaiting a report on new home sales.

European markets are mostly lower after Fitch Ratings said Portugal’s recovery will be slower than other countries that use the euro, hurting Portugal’s ability to repay its debt. Debt problems in Europe have been one of the few drags on stocks in recent months.

Mounting debt in Greece, Portugal and other euro-zone nations have investors worried the countries will struggle to rebound economically and upend a global recovery.

The dollar strengthened sharply against the euro and other major currencies. The dollar is at its highest level against the euro since May.

In early morning trading, the Dow Jones industrial average fell 35.83, or 0.3 percent, at 10,853.00. The Standard & Poor’s 500 index dropped 4.03, or 0.3 percent, at 1,170.14, while the Nasdaq composite index fell 10.01, or 0.4 percent, at 2,405.23.

The Dow rallied to its highest level since September 2008 on Tuesday after the National Association of Realtors said a drop in sales of existing homes last month wasn’t as big as forecast. The housing market will be in focus again Wednesday when the Commerce Department reports on new home sales.

The housing report is expected to show that sales rose 3.6 percent to a seasonally adjusted annual rate of 320,000 last month, bouncing off a record low seen in January, according to economists polled by Thomson Reuters. The report is due out at 10 a.m. EDT.

A recovery in the sector has been slow and uneven. Reports showing improvement or stabilization in the housing market have regularly been met with buying on Wall Street, such as Tuesday’s big gains. The Dow jumped nearly 103 points, or 1 percent, and has risen in 10 of the last 11 trading sessions.

Investors appear to be brushing off a report on orders to factories for big-ticket manufactured goods that showed continued growth. Unlike the housing market, the manufacturing sector has shown steady improvement in recent months.

Durable goods orders — items expected to last at least three years — rose 0.5 percent last month, slightly below expectations for 0.7 percent growth. However, it was the third straight month orders rose, and excluding the volatile transportation sector, orders jumped by more than expected.

Orders climbed 0.9 percent in February excluding aircraft and other transportation orders. Economists had forecast an increase of 0.6 percent.

In corporate news, General Mills Inc. said its fiscal third-quarter profit jumped 15 percent and topped forecasts. The maker of Cheerios and Yoplait yogurt also raised its earnings outlook for 2010, though it still falls short of analysts’ expectations. General Mills shares fell 43 cents to $73.14.

Homebuilder Lennar Corp. said its fiscal first-quarter loss narrowed. The company said it is on track to return to profitability this year. Its shares climbed $1.14, or 6.7 percent, to $18.20.

MF Global Holdings Ltd. shares surged after it named former New Jersey Governor and Goldman Sachs executive Jon Corzine as its new CEO. It jumped 92 cents, or 12.6 percent, to $8.24.