US stock market drifts lower in afternoon trading
By MATTHEW CRAFT (AP)
NEW YORK (AP) — U.S. stocks drifted lower Tuesday afternoon even as reports showed the economy gaining strength. Crude oil prices sank, pulling Exxon Mobil, Chevron and other oil producers down.
Investors were also looking ahead to major events later this week. The European Central Bank holds a meeting on Thursday, and a key U.S. jobs report comes out Friday.
KEEPING SCORE: The Dow Jones industrial average fell 42 points, or 0.1 percent, to 17,056 as of 3 p.m. Eastern time. The Standard & Poor's 500 index slipped three points, or 0.1 percent, to 2,000. The Nasdaq rose 10 points, or 0.2 percent, to 4,590.
ECONOMY: 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.
REACTION: "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."
MORE TO COME: Traders will be focusing on the U.S. employment report for August due Friday. Investor confidence over the U.S. economy has risen following several months of strong growth in hiring and corporate profits and a series of major corporate acquisitions.
OIL: The price of crude oil slumped, pulling down shares of oil and gas companies. U.S. benchmark crude fell $3.02 to $92.97 a barrel in New York. Energy companies were the biggest losers among the 10 sectors in the S&P 500 index.
CRUISE-SHIP DEAL: Norwegian Cruise Line Holdings jumped 11 percent on the news that it had agreed to buy Prestige Cruises International for $3 billion. Buying Prestige will help Norwegian compete with its larger rivals: Carnival Corp. and Royal Caribbean Cruises. Norwegian Cruise Line's stock gained $3.66 to $36.97.
DRUG STRUGGLES: Exelixis 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 $2.25, or 54 percent, to $1.89.
BONDS: U.S. government bond prices dropped Tuesday, pushing up long-term interest rates. The yield on the 10-year note climbed to 2.41 percent, up from 2.35 percent late Friday.
EUROPE: Major markets across Europe were mixed. Germany's DAX rose 0.3 percent, and both the CAC-40 in France and Britain's FTSE 100 were flat.
ASIA: Japan's Nikkei 225 gained 1.2 percent, while China's Shanghai Composite jumped 1.4 percent. Hong Kong's Hang Seng eked out a gain of 0.1 percent.
DOLLAR RIDES, EURO SLIDES: 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.
CHINA: Indicators such as power generation, steel output and property sales point to continued weakness in the world's No. 2 economy, raising expectations that the Chinese government will take steps to support growth.
WHAT'S NEXT: "We still expect China's overall economy to cool toward the year's end, and to stay weak through 2015," said Wang Tao, an economist at UBS in Hong Kong.