Market Wrap: Stocks Slip as Investors See Weakness Overseas

Dow Opens Slightly Lower After Labor Day Weekend
Spencer Platt/Getty Images

NEW YORK -- Concerns over weaker global economic growth appeared to outweigh a pair of strong reports on the U.S. economy Tuesday, nudging stocks to a tiny loss.

Crude oil prices sank 3 percent, pulling down stocks of oil producers. Small-companies, which have fewer ties to the world economy, made gains. Meanwhile, the dollar reached a one-year high against the euro as short-term interest rates edged up.

"It's the picture of U.S. strength against the backdrop of global weakness," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.

The S&P 500 index (^GPSC) slipped 1.09 point, less than 0.1 percent, to 2,002.28. The Dow Jones industrial average (^DJI) fell 30.89 points, or 0.2 percent, to 17,067.56. Market gauges that give greater weight to smaller companies fared better. The Nasdaq composite (^IXIC) rose 17.92 points, or 0.4 percent, to 4,598.19.

Two reports out Tuesday offered encouraging signs of U.S. economic growth. The Institute for Supply Management, a trade group, said its gauge of manufacturing reached 59 in August, the highest level since March 2011, buoyed by new orders for goods and increased production. Separately, the Commerce Department said that construction spending surged 1.8 percent in July, the biggest increase in more than 2 years.

"It's clear we have a very solid economic expansion, but the stock market isn't buzzing much at all," said Anastasia Amoroso, Global Market Strategist at J.P. Morgan Funds. The explanation, she said, is that signs of solid growth raise the odds that the Federal Reserve will move to lift short-term interest rates. Rate increases typically slow stock markets down.

"We're moving closer and closer to higher rates," Amoroso said, "so strong economic momentum could actually put a damper on the market."

A handful of key events and economic reports out later in the week could make for volatile trading.

The European Central Bank meets Thursday, and the U.S. employment report for August comes out Friday. Stronger hiring by U.S. businesses and rising corporate profits have helped push the S&P 500 index up 8 percent this year.

Ablin said a stock market drop caused by the Fed hiking rates wouldn't exactly be a bad thing. Waiting too long could make the pain much worse. "I would rather take a spoonful of medicine today than a tourniquet later."

Major markets across Europe were mixed. Germany's DAX inched up 0.3 percent, and both the CAC-40 in France and Britain's FTSE 100 ended flat.

The euro continued its summer slide, hitting $1.313 against the U.S. currency. Recent economic reports have shown the eurozone's economy slowing to a crawl, and that has weighed on the euro.

The price of oil slumped, pulling down shares of oil and gas companies. Benchmark U.S. crude dropped $3.08 to close at $92.88 a barrel, its lowest price since January. Brent crude, a benchmark for international oils used by many U.S. refineries, fell $2.45 to end at $100.34. That was Brent's lowest closing price since May of 2013.

News that Norwegian Cruise Line (NCLH) agreed to buy Prestige Cruises International for $3 billion sent Norwegian Cruise Line's stock up 11 percent. Analysts said the deal should help Norwegian compete with its larger rivals: Carnival (CCL) and Royal Caribbean Cruises (RCL). Norwegian Cruise Line jumped $3.68 to $36.99.

Exelixis (EXEL) lost more than half its value following news that the drug developer's potential treatment for prostate cancer fell short in late-stage research. The company's stock plunged $2.29, or 55 percent, to $1.85.

U.S. government bond prices dropped, lifting long-term interest rates. The yield on the 10-year note rose to 2.41 percent, up from 2.35 percent late Friday.

In metals trading, gold fell $22.40, or 1.7 percent, to $1,265 an ounce. Silver slipped 34 cents, also 1.7 percent, to $19.152 an ounce. Copper was flat at $3.155 a pound.

What to Watch Wednesday:
  • Automakers report vehicle sales for August throughout the day.
  • Payroll processor ADP (ADP) releases its survey of private-sector hiring for August at 8:15 a.m. Eastern time.
  • The Commerce Department releases factory orders for July at 10 a.m.
  • The Federal Reserve releases its Beige Book survey of regional economic conditions in the U.S. at 2 p.m.
These major companies are schedule to release quarterly financial statements:
  • ABM Industries (ABM)
  • G-III Apparel (GIII)
  • H&R Block (HRB)
  • Navistar (NAV)
  • PVH (PVH)
  • Toll Brothers (TOL)

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Weakness in Europe, please, this country has seen more than 2 fold increase in food stamps, crime is skyrocketing, the country is pushing 30 trillion in debt and rising and Europe is the problem, WOW

September 02 2014 at 11:48 PM Report abuse rate up rate down Reply

Investors are skittish
because they sense weakness and confusion in Obama's responses
in the Ukraine, Syria, Iraq, middle east, africa.......

September 02 2014 at 11:37 PM Report abuse -1 rate up rate down Reply

Everyone needs to pull back, the bottom is getting ready to drop out again

September 02 2014 at 7:04 PM Report abuse +1 rate up rate down Reply
1 reply to cpruitt221's comment

And who are you that knows nothing?

September 02 2014 at 11:53 PM Report abuse -1 rate up rate down Reply

Maybe you can write your losses off by buying Robins Island and the Cutchogue House and donating it back to the the family that lost it through an attainer by the state of NY because of the Revolutionary War. I am sure Parker Wickham's descendants and his siblings decendants would be grateful. :)

September 02 2014 at 5:38 PM Report abuse +1 rate up rate down Reply

The participation rate is low must be why the stocks are still so high. You lose a few points on an over bought market place you cry wolf. You should lose your investments like many of us lost our jobs, then you can complain about something that is real.

September 02 2014 at 5:24 PM Report abuse +1 rate up rate down Reply

Right and we feel very sorry for their financial losses considering over seas investing costs Americans their jobs.

September 02 2014 at 5:14 PM Report abuse +2 rate up rate down Reply