Interest rate fears saddle stocks
Stocks closed modestly lower Wednesday as the latest batch of upbeat economic data made investors uneasy about more interest rate hikes by the Federal Reserve.
Disappointment over blue chip Procter & Gamble Co.’s lower-than-forecast revenue saddled the Dow Jones industrial average and countered solid earnings from Qwest Communications International Inc. and an improved outlook at Qualcomm Inc., as well as a retreat in oil prices.
An unexpected jump in service sector growth extended the recent string of data showing the economy expanding at a brisk pace, with a sharp upswing in factory orders also brightening that picture. However, the gains again had the market concerned about rising interest rates as the Fed continues its fight against inflation.
Russ Koesterich, senior portfolio manager at Barclays Global Investments, said the persistently high level of oil prices is putting pressure on consumer spending, and he added that rising Treasury yields also created some headwind for stocks.
“The inflationary pressures are building, albeit slowly,” Koesterich said. “What we haven’t seen so far is commodities strength, particularly in energy, filter into core inflation. But the fear is that it’s going to happen soon.”
At the close, the Dow was off 16.17, or 0.14 percent, at 11,400.28, after losing as much as 54 points intraday. On Tuesday, the Dow finished at 11,416.45, its best close since Jan. 19, 2000.
Broader stock indicators also drooped. The Standard & Poor’s 500 index slid 5.36, or 0.41 percent, to 1,307.85, and the Nasdaq composite index dropped 5.87, or 0.25 percent to 2,303.97.
A barrel of light crude slumped $2.33 to settle at $72.28 on the New York Mercantile Exchange, where gasoline dropped 8.9 cents to $2.086 per gallon.
In economic news, the Institute for Supply Management’s April services index gained 2.5 points to 63, while economists forecast a 0.9 slide. The Commerce Department said factory orders bounced back to grow 4.2 percent in March, up from a 0.4 percent increase the month before; economists were looking for a 3.7 percent rise.
Declining issues led advancers by about 9 to 7 the New York Stock Exchange, where volume of 1.75 billion shares topped the 1.73 billion shares changing hands at the same point Tuesday.
The Russell 2000 index of smaller companies rose 0.12, or 0.02 percent, to 767.73.
Japan’s stock markets were closed for the rest of the week for national holidays. Britain’s FTSE 100 lost 1.19 percent, Germany’s DAX index plunged 1.36 percent and France’s CAC-40 was lower by 0.9 percent.