US stocks fall

Wall Street is now worrying about the companies usually seen as safe havens.

After an early rally, investors succumbed to their concerns about disappointing earnings and the market ended the day with a loss.

Falling consumer stocks weighed most heavily on the Dow Jones industrial average, which slid 122 points. Meanwhile, the tech-focused Nasdaq composite index showed only a moderate retreat.

Fourth-quarter numbers from Kraft Foods, Walt Disney, and Time Warner provided the latest reminder of the economy’s struggles. The weaker-than-expected reports and a warning from Costco Wholesale left investors fearful that consumers are cutting back even more than most analysts thought.

“Consumer staples have enjoyed relative safety in this environment and now these new revelations are raising questions among investors,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

The market had rallied early in the day after a better-than-expected reading on the service sector. The Institute for Supply Management said the sector shrank in January at a slower pace than in December. Still, it was the fourth straight month that business activity in services contracted.

The trade association of purchasing executives said its index rose to 42.9 in January from a revised 40.1 in December. Analysts had expected a reading of 39, according to a survey by Thomson Reuters. The ISM’s report on the manufacturing sector, issued Monday, similarly came in above expectations even as it signalled continuing weakness.

“There’s so much uncertainty right now that investors are looking for any clues that the economy may be starting to stabilise and turn around,” said Michael Sheldon, chief market strategist at RDM Financial Group.

Wall Street was also hoping that politicians in Washington would soon show further progress on a bill to help revive the economy by boosting spending and lowering taxes.

The Senate is getting closer to passing a US$900bn (€700bn) stimulus plan. Senators recently added money to the bill for medical research and tax breaks for car purchases. A similar plan has already cleared the House.

“Overall, we seem to be having a tug of war between very weak economic data and the prospect of a pick up in growth later this year helped by the upcoming stimulus package and potential help for the housing and financial services industries,” Mr Sheldon said.

According to preliminary calculations, the Dow fell 121.70, or 1.51%, to 7,956.66.

Broader indicators also fell. The Standard & Poor’s 500 index fell 6.28, or 0.75%, to 832.23, and the Nasdaq composite index fell 1.25, or 0.08%, to 1,515.05.

The Russell 2000 index of smaller companies fell 4.42, or 0.98%, to 448.48.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 1.39 billion shares compared with 1.35 billion shares traded on Tuesday.