Stocks Down on Factory, Construction Data
By Vivian Chu
NEW YORK (Reuters) - U.S. stocks fell on Tuesday at midmorning after two reports found that the manufacturing sector remained weak and construction spending unexpectedly posted its biggest drop in a year, disappointing investors and renewing doubts about the strength of the U.S. economy.
The Institute for Supply Management's national factory gauge edged up to 49.8 in June from 49.4 in May. That was well short of Wall Street forecasts, which had pegged the figure at 51.0. A number above 50 signals growth while a figure below that level points to contraction.
Separately, the government said U.S. construction spending fell an unexpected 1.7 percent in May, matching its drop in May 2002. Construction outlays fell to a seasonally adjusted $869.8 billion in May, versus expectations of a slight increase.
"There's a combination of concerns over earnings ... and the economic news coming out was not as strong as expected. People are hoping to see some signs of a recovery, but we've yet to see one on the corporate side," said Owen Fitzpatrick, head of U.S. equity group at Deutsche Bank Private Banking.
The Dow Jones industrial average (^DJI - news) was down 90.71 points, or 1.01 percent, at 8,894.73. The broader Standard & Poor's 500 Index (^SPX - news) declined 9.6 points, or 0.99 percent, to 964.90. The technology-laced Nasdaq Composite Index (^IXIC - news) was off 18.26 points, or 1.13 percent, at 1,604.54.
The ISM number was particularly disappointing, Fitzpatrick said. "The ISM has been hovering around 50 for quite some time, and people are getting concerned it's not improving. Given the length of time we had interest rate cuts, it's unusual to see a delay in recovery for such a prolonged period of time."
Shares of biotechnology company Millennium Pharmaceuticals (Nasdaq:MLNM - news) fell after it said it partnered with a unit of Johnson & Johnson (NYSE:JNJ - news) to market recently approved cancer drug Velcade. Analysts were disappointed with the deal's terms, and Millennium shares fell $2.05, or 13 percent, to $13.68.
Shares of restaurant chain Cheesecake Factory (Nasdaq:CAKE - news) fell after Salomon Smith Barney trimmed its earnings estimates and cut its rating on the company to "underperform" from "in-line," citing the possibility of weak sales. Cheesecake Factory shares fell $1.80, or 5 percent, to $34.06. http://story.news.yahoo.com/news?tmpl=story&cid=568&ncid=749&e=1&u=/nm/20030701/bs_n...