Stock futures fall as weak durable goods orders adds to concerns about economy

By Stephen Bernard, AP
Wednesday, August 25, 2010

Stock futures fall on weak durable goods orders

NEW YORK — Stock futures fell Wednesday after a disappointing report on durable goods added to concerns about the pace of economic recovery.

Nervous investors again moved money into the Treasury bond market, driving interest rates lower.

The slower than expected rise in durable goods orders follows a string of other disappointing economic reports in recent weeks that shows growth in the economy is waning more than anticipated. Investors are also apprehensive ahead of a report later Wednesday on new home sales, following a a report Tuesday that sales of existing homes fell sharply last month.

Major indexes have been hit hard in recent days because of concerns about whether the economy will fall back into recession or at least be stuck in a prolonged period of very slow growth. The Dow Jones industrial average has fallen 3.6 percent during its current four-day losing streak.

The Commerce Department said orders for goods expected to last at least three years rose just 0.3 percent last month. That was much worse than the 2.8 percent growth economists had forecast, according to Thomson Reuters.

Excluding the volatile transportation sector, orders actually tumbled 3.8 percent in July. Economists were expecting 0.5 percent growth.

The weak report adds to evidence that the manufacturing sector is weakening as the year wears on. Manufacturing activity had shown some of the most consistent growth during the first half of the year, but reports recently have shown that growth is fading.

Ahead of the opening bell, Dow Jones industrial average futures fell 64, or 0.6 percent, to 9,959. Standard & Poor’s 500 index futures fell 7.60, or 0.7 percent, to 1,042.20, while Nasdaq 100 index futures fell 15.00, or 0.9 percent, to 1,758.75.

The yield on the 10-year Treasury note fell to 2.44 percent from 2.49 percent late Tuesday. Its yield is often used to help set interest rates on mortgages and other consumer loans.

Traders will also be closely watching a report Wednesday about sales of new homes to see if it confirms Tuesday’s data that the housing market continues to falter. Tuesday’s report showed sales of previously occupied homes fell to a 15-year low in July, adding to concerns that the economy could fall back into recession.

Sales of new homes were likely flat in July compared with a month earlier, according to Thomson Reuters. June sales rebounded to an annual rate of 330,000, topping forecasts, after hitting a record low in May.

The Commerce Department report is due out at 10 a.m. EDT.

Home sales have been particularly weak since a home buyer tax credit expired at the end of April. High unemployment has kept people from buying homes because they are worried about their jobs. Banks have also been cautious in making new loans after taking huge losses in recent years from failed mortgages.

Overseas, Britain’s FTSE 100 fell 1.2 percent, Germany’s DAX index fell 0.9 percent, and France’s CAC-40 fell 1.5 percent. Japan’s Nikkei stock average fell 1.7 percent.

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