Stocks fall after batch of mixed earnings; disappointing economic reports

Stocks drop after mixed earnings, economic reports

NEW YORK — The stock market’s big rally stumbled Tuesday on disappointing earnings and economic reports that raised investors’ concerns about the strength of the recovery.

The Dow Jones industrial average fell about 25 points in late morning trading after rising 208 on Monday, when the economic numbers looked brighter. Investors have found it hard to reconcile the mixed reports of the past few months, and are quick to sell on any news that they believe points to a weaker economy.

On Tuesday, they reacted to earnings and revenue at consumer products maker Procter & Gamble Co. and Dow Chemical Co. that fell short of forecasts. The market has been focusing on revenue figures because they indicate whether consumer spending is improving enough to keep the recovery going.

The day’s economic reports added to the market’s sour mood. The Commerce Department said consumer spending and income were unchanged in June, another sign of a slower economy. The country’s savings rate rose, which means consumers would rather hold on to their money or pay down debt than spend.

The department also said factory orders dropped more than predicted in June, falling 1.2 percent. And a separate report from the National Association of Realtors said pending home sales fell last month.

The combination of disappointing earnings and weak economic readings reminded investors that the economy is still uncertain. Traders are also uneasy ahead of the Labor Department’s July employment report due out Friday. Consumers are not expected to significantly increase their spending until they feel more secure about their jobs.

Tuesday’s pullback was also to be expected after such a big gain on Monday, which came on renewed optimism about the economy. Trading has been erratic since the spring amid the conflicting signals about the recovery, and many traders are quick to cash in any profits.

“The economic data continues to be murky at best,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.

In late morning trading, the Dow Jones industrial average fell 25.89, or 0.2 percent, to 10,648.34. The Standard & Poor’s 500 index fell 3.44, or 0.3 percent, to 1,122.42, while the Nasdaq composite index fell 8.65, or 0.4 percent, to 2,286.71.

About three stocks fell for every two that rose on the New York Stock Exchange where volume came to 248.1 million shares.

Investors sought the safety of Treasury bonds, which pushed interest rates lower. Reports the Federal Reserve could start buying bonds again also added to their strength. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.91 percent from 2.97 percent late Monday.

Procter & Gamble, the maker of Tide and Pampers, fell $2.31, or 3.7 percent, to $59.75. Dow Chemical dropped $2.48, or 8.8 percent, to $25.85. Pfizer rose 71 cents, or 4.6 percent, to $16.19.

The National Association of Realtors said its index of pending home sales fell to its lowest level since it began keeping records in 2001. The index dropped 2.6 percent to a reading of 75.7. Economists had predicted that the index that measures the number of people who signed contracts to purchase homes would rise to 78.1.

A housing recovery is expected to be slow now that tax incentives for buyers have expired. And many would-be buyers are worried about their jobs.

“It’s like changing the direction of a super tanker, it doesn’t happen overnight,” Leif Thomsen, chairman and CEO of mortgage lender Mortgage Master Inc. said of the housing market.

The Commerce Department said personal income and spending were both unchanged in June after rising 0.3 percent and 0.1 percent respectively in May. The readings were also short of forecasts of economists polled by Thomson Reuters.

The department also said factory orders fell 1.2 percent in June, the second consecutive monthly drop and more than double the amount economists expected. The results come a day after a broader manufacturing survey showed expansion in the sector in July.

Overseas, Britain’s FTSE 100 fell 0.3 percent, Germany’s DAX index rose 0.2 percent, and France’s CAC-40 fell 0.2 percent. Japan’s Nikkei stock average rose 1.3 percent.