Stocks retreat after new manufacturing, jobs reports show recovery remains tepid

Stocks fall slightly after mixed economic reports

NEW YORK — Stocks fell slightly in morning trading Thursday after a batch of economic reports showed that growth remains tepid even as companies report strong earnings.

A regional manufacturing index in New York plummeted this month, while a national report showed modest growth in industrial output. The government also reported that first-time claims for unemployment benefits fell, but that was largely because of seasonal factors.

The Dow Jones industrial average fell 29 points, putting its seven-day winning streak in jeopardy.

JPMorgan Chase & Co. was the latest company to report big profits, following Intel Corp. and Alcoa Inc. earlier in the week. The bank also cut down its loan-loss reserves, which could be a sign that mortgage and loan defaults are moderating.

However, JPMorgan’s CEO Jamie Dimon still struck a cautious tone about future economic growth.

“Earnings are strong,” said Sandy Mehta, principal and chief investment officer of Value Investment Principals. “But the underlying economy is not as strong.”

Mehta said investors are readjusting their views for future economic growth after being disappointed by economic reports in May and June.

“There was too much pessimism,” Mehta said. With traders recalibrating their expectations for the economy, strong earnings could be the biggest factor in deciding stock movements in the coming months, he said.

Upbeat earnings over the past two days have helped markets avoid big dips, even after the Federal Reserve cut its forecast for future economic growth Wednesday.

The Dow Jones industrial average fell 28.57, or 0.3 percent, to 10,339.36. The Standard & Poor’s 500 index fell 2.56, or 0.2 percent, to 1,092.61, while the Nasdaq composite index fell 7.11, or 0.3 percent, to 2,242.73.

JPMorgan Chase shares dipped 20 cents to $40.15.

Initial jobless claims fell by 29,000 to a seasonally adjusted 429,000, the lowest level since August 2008. Economists polled by Thomson Reuters had predicted claims would drop to 450,000.

However, the initial claims could be skewed because General Motors and other manufacturers skipped their usual July shutdowns. Normally that would lead to temporary seasonal layoffs, which did not show up in the latest figures.

The steep drop in the Empire State Manufacturing index is also likely tempering optimism that had been seen in recent days following strong earnings. Manufacturing had shown the most consistent growth coming out of the recession, but now data is indicating it too is slowing down heading into the second half of the year.

The index fell to 5.08, well below the 18.50 economists had predicted and the 19.57 reported last month. The Philadelphia Fed releases its regional manufacturing report later Thursday.

The government’s national report showed output at the nation’s factories, mines and utilities rose by 0.1 percent in June, better than the 0.1 percent drop economists forecast.

Meanwhile, inflation before goods reach the consumer level fell more than expected last month. It dropped 0.5 percent, compared with a forecast for a decline of 0.1 percent.

A drop in energy costs and the biggest plunge in food costs in eight years kept inflation at bay. The drop in prices should allow the Federal Reserve to hold key interest rates at historically low levels to try and stimulate the economy.