NEW YORK (AP) — Stocks retreated in morning trading Tuesday as investors turned their attention to more signs of weakness in the U.S. economy and poor corporate earnings reports.
The Commerce Department reported that consumers cut spending in June by the biggest amount in nearly two years. Analysts had predicted a slight increase. Incomes also rose by the smallest amount since September, reflecting a weak job market.
The S&P index fell 15 points, or 1.2 percent, to 1,271. The Dow Jones industrial average lost 111 points, or 0.9 percent, to 12,021. The Dow was headed for its eighth straight day of losses. The Nasdaq composite fell 26, or 0.9 percent, to 2,719.
Pfizer Inc. fell more than 2 percent after the drugmaker said that its second-quarter revenue was slightly below analysts’ expectations. Archer Daniels Midland Co dropped nearly 4 percent after the company said that it missed Wall Street’s profit forecasts. High-end retailer Coach Inc. lost nearly 6 percent after it narrowly missed analyst’s profit projections.
The consumer spending pullback was the latest sign of weakness in the U.S. economy. On Monday an early stock rally over relief that the House had passed a debt limit compromise was halted by a report that U.S. manufacturing barely grew last month, a much weaker showing than analysts had expected.
Many economists, including Federal Reserve Chairman Ben Bernanke, have said the U.S. economy would gain momentum in the second half of the year as gas prices fall and Japan’s factories recover from the earthquake disaster in March. Slow U.S. manufacturing growth, a weak job market and concerns about spending cuts in the debt deal have cast doubt on those predictions.
The growth of China’s and India economies have also slowed recently after their respective central banks raised interest rates. American corporations have counted on increasing profits in China as a way to make up for slower revenue growth in the U.S. Companies in the S&P 500 index are expected to make nearly half of their profits overseas in 2011.
“The market is starting to wonder where the growth is going to come from,” said Nick Kalivas, a vice president of financial research at MF Global. “It hasn’t hit the panic button yet, but that’s where we’re drifting.”
The latest signs of economic weakness pushed government debt prices higher. The yield on the 10-year Treasury again fell to a new low for the year of 2.72 percent from 2.75 percent Monday. Yields fall when bond prices rise. Gold, another asset investors buy when they’re worried about losses in other markets, gained 1.2 percent to $1,641 an ounce.
Investors are expecting that the Senate will vote Tuesday to raise the nation’s borrowing limit. Tuesday is the deadline to raise the limit, otherwise the government won’t have enough money to pay all its bills. The House passed the measure Monday night.
Ford, General Motors and Toyota are among automakers that will release July sales figures throughout the day.