NEW YORK: World stocks fell, snapping a four-day rally on Wednesday, July 28 as weak orders for U.S. durable goods in June and the Federal Reserve's downbeat take on the economy dampened the outlook and drove the dollar lower.
New orders for long-lasting U.S. manufactured goods fell unexpectedly for a second straight month, marking their largest decline since August, in a fresh sign the economy had slowed in the second quarter. But some analysts said the report was respectable after stripping out certain categories.
The Fed's Beige Book report, a summary of U.S. economic conditions, indicated activity was not as robust in a few districts and had lost steam over the past several weeks.
A rally built on strong earnings lifted the broad Standard & Poor's 500 index on Monday to close above its 200-day moving average, a closely watched measure of market direction.
But the Fed's assessment of the economy and weak data weighed on sentiment.
"Earnings have been good, but the overall economy is still sluggish at best and is not coming back as much as we would have hoped," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati.
MSCI's all-country world index dipped 0.12 percent, and the Thomson Reuters global stock index was slightly lower.
DESPITE PULLBACK, DOW UP FOR YEAR
The Dow Jones industrial average fell 39.81 points, or 0.38 percent, to end at 10,497.88. The Standard & Poor's 500 Index fell 7.71 points, or 0.69 percent, to finish at 1,106.13. The Nasdaq Composite Index slipped 23.69 points, or 1.04 percent, to close at 2,264.56.
Even with Wednesday's decline, the Dow was still in positive territory for the year, while the S&P 500 and the Nasdaq were slightly lower for 2010 so far.
With the S&P's 200-day moving average at about 1,114, traders are trying to determine where it has peaked or represents a consolidation point before further gains.
U.S. corporate results continued to surprise on the upside.
Defense contractor General Dynamics Corp and ConocoPhillips, the third-largest U.S. oil company, both posted stronger-than-expected quarterly profits.
After almost half of the S&P 500 having reported earnings, 77 percent of companies have beat expectations, according to Thomson Reuters Proprietary Research.
The dollar fell against the yen and eased against the euro as the weaker-than-expected reading of U.S. durable goods orders added to fears about the economy.
The dollar was down against a basket of major currencies, with the U.S. Dollar Index down 0.07 percent at 82.126.
The euro was up 0.02 percent at $1.2996.
Against the yen, the dollar was down 0.50 percent at 87.44.
Sterling hit a five-month high against the dollar at $1.5630 as earlier comments from the Bank of England did little to quell optimism about the UK economic outlook.
BONDS RISE AFTER AUCTION AND DATA
The Commerce Department said U.S. durable goods orders fell 1.0 percent in June after a revised 0.8 percent drop in May. Analysts forecast an increase of 1.0 percent.
But Michael Woolfolk, senior currency strategist at BNY Mellon in New York, said the durable goods report is always difficult to digest. The number was negative because of commercial aircraft orders, he said.
"If you strip out aircraft and defense, you're left with a respectable rise of 0.6 percent" in the important capital goods category, he said.
Those orders were up 15.2 percent on a year-on-year basis.
"That's consistent with a strong recovery in industrial production and durable goods orders. So these numbers are not very concerning," Woolfolk said.
Treasuries rose following a strongly bid auction of $37 billion in five-year notes, which sold at yields that were lower than the same notes trading at the time in the open market.
"The market just sort of took today's data and said, 'You know what? There's still a huge demand for Treasuries; the economy's not as strong as we want it, I think we'll go ahead and buy these things,'" said Todd Colvin, vice president at MF Global in Chicago.
The benchmark 10-year U.S. Treasury note gained 13/32 in price to yield 3.00 percent after trading flat at midday.
OIL DROPS, COPPER CLIMBS
Oil prices fell a second straight day on a surprise crude oil inventory build and weak economic data.
The U.S. Energy Information Administration inventory report showed crude stocks rose 7.31 million barrels last week as imports jumped. A Reuters analyst survey had forecast crude oil stocks would be down 1.6 million barrels.
"The crude data looks decidedly bearish," said Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois.
U.S. crude for September delivery fell 51 cents, or 0.66 percent, to settle at $76.99 a barrel.
ICE Brent slipped 7 cents to settle at $76.06 a barrel.
Copper rose to its highest point since early May after assurances on economic growth from top metals consumer China and improving fundamentals.
U.S. gold futures for August delivery climbed $2.40 to settle at $1,160.40 an ounce.
Earlier, Japan's Nikkei climbed 2.7 percent for its highest close and biggest one-day gain in two weeks. MSCI's index for Asian stocks less Japan trimmed gains to trade flat. - Reuters
