Investors sent stocks sharply lower Wednesday after data on factory orders and the services industry came in below expectations.
The decline broke a four-day advance, and many analysts said a pullback was due after the strong rise, which sent the Standard & Poor’s 500 index and Nasdaq composite to their highest levels this year.
At midday, market indicators fell about 1 percent, including the Dow Jones industrial average, which lost more than 90 points.
The Commerce Department said factory orders rose 0.7 percent in April — the second gain in the past three months — but the increase fell short of the 0.9 percent rise analysts had been expecting.
Also, a trade group reported that the services sector shrank in May at the slowest pace since October. However that indicator also came in below economists’ estimates and marked the eighth straight monthly decline.
Stocks have surged more than 30 percent since early March on encouraging signs in banking, the housing market and consumer confidence, but many analysts say investors need to see more convincing signs of growth before sending stocks back up again.
“We do believe that the market expectations are shifting from simple survival to sustainability,” said Alan Gayle, senior investment strategist at RidgeWorth Capital Management.
Gayle said he began increasing his stock holdings back in March, when the market began rallying off of 12-year lows, on signs that economic data was becoming “less bad.” But, he added, “to make an even stronger commitment less bad is not good enough.”
Comments from Federal Reserve Chairman Ben Bernanke in front of Congress did little to reassure the market. Bernanke said the government needed to figure out a way to ease its massive debt load, and that failing to do so could undermine efforts to restore the economy to health.
In midday trading, the Dow Jones industrial average fell 93.19, or 1.1 percent, to 8,647.68. The Standard & Poor’s 500 index fell 14.22, or 1.5 percent, to 930.52, and the Nasdaq composite index dropped 14.48, or 0.8 percent, to 1,822.32.
About 3 stocks fell for every one that rose on the New York Stock Exchange, where volume came to 482.9 million shares, compared with 521.4 million shares at the same time a day earlier.
Copyright 2009 The Associated Press.