Stocks fall after NY manufacturing sector, Japanese economy show signs of slow growth

Stocks drop as Japanese economy latest to slow

NEW YORK — Stocks retreated Monday after a regional manufacturing report fell short of forecasts and Japan became the latest country to show signs of slowing growth.

Both reports added to concerns about the pace of a global economic recovery. The Dow Jones industrial average fell 60 points in early morning trading. Broader indexes also fell.

Japan said its economy grew just 0.1 percent in the second quarter, well below the 1.2 percent growth in the first quarter and short of expectations. The report follows signs last week that both the U.S. and Chinese economies are not growing as fast as earlier in the year.

A report Monday showed manufacturing activity in New York rebounded slightly this month after declining sharply in July. Despite the modest gain, activity did not expand as much as had been forecast, indicating economic growth remains tepid.

The Federal Reserve Bank of New York’s Empire State Manufacturing Index rose to 7.1 in August from 5.1 in July. Economists polled by Thomson Reuters forecast the index would rise to 8. The index was as high as 19.6 just two months ago.

Regional manufacturing reports have shown a broad slowdown in the sector in recent months, a trend seen in other industries as well. It is particularly discouraging because manufacturing had provided the most consistent signs of growth during the first few months of the year.

Investors will get readings on the housing and jobs market later in the week that could also provide clues about the pace of a rebound. Those two sectors remain the hardest hit as the economy struggles to grow. A rise in unemployment claims last week added to stock losses.

The Dow Jones industrial average fell nearly 400 points over the past four trading days after the Federal Reserve took a more cautious tone about the pace of recovery and said it would start buying Treasury bonds to try to stimulate growth. Major retailers like J.C. Penney Co. also warned that profits the rest of the year would not be as big as previously estimated because shoppers are cutting back on spending.

Lowe’s Cos. said Monday its quarterly profit and revenue rose, though both measures fell short of forecasts. The home-improvement retailer also lowered its full-year revenue forecast.

Investors continued to snap up Treasurys Monday, driving interest rates lower. The drop came because of continued concerns that the global economy will slow and mostly strong corporate earnings reported in the second quarter will not be able to hold up.

In early morning trading, the Dow fell 60.02, or 0.6 percent, to 10,242.83. The Standard & Poor’s 500 index fell 5.33, or 0.5 percent, to 1,073.92, while the Nasdaq composite index fell 8.35, or 0.4 percent, to 2,165.13.