NEW YORK — Stocks fell for a third day Friday after disappointing reports on manufacturing and home sales dampened enthusiasm about the state of the economy.
Durable goods orders, a key indicator for the manufacturing industry, fell unexpectedly in August. It was the second drop in three months and the latest sign that any rebound inside the nation's factories is likely to be slow.
Meanwhile, the Commerce Department also reported that new-home sales inched up to 429,000 last month from 426,000 in July. Economists surveyed by Thomson Reuters had expected a pace of 440,000.
Stocks fell Thursday after a weaker-than-expected reporton existing-home sales and drops in commodities prices, which hurt materials and industrial stocks. The market also slid Wednesday on worries that the Federal Reserve would be too quick to withdraw its financial supports from the economy.
With major indicators like the Standard & Poor's 500 index up 55.3 percent from a 12-year low in March, market analysts have been saying that a break in the advance is necessary.
"We had a market that got considerably overbought," said Steven Goldman, chief market strategist at Weeden & Co. in Greenwich, Conn. "We still think things should stay relatively orderly in the pullback, and we're still likely to see further gains."
The Dow Jones industrialaverage fell 42.25, or 0.4 percent, to 9,665.19.
The broader Standard & Poor's 500 index fell 6.40, or 0.6 percent, to 1,044.38, and the Nasdaq fell 16.69, or 0.8 percent, to 2,090.92.
Four stocks fell for every three that rose on the New York Stock Exchange, where consolidated volume came to 4.61 billion shares, compared with 5.64 billion Thursday.
For the week, the Dow is down 1.6 percent, the S&P 500 index is off 2.2 percent and the Nasdaq is down 2 percent.
The week's economic data weren't bad and still far better than only months ago, but the numbers on new and existing home sales as well as durable goods still fell short of expectations. That could signal that investors have been underestimating how long it might takethe economy to recover.
Reports expected next week likely will shape investors' views of the economy. The Labor Department's September employment report is due at the end of the week, and figures are also expected on consumer confidence, manufacturing, factory orders and home prices.
Bond prices traded mixed Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.32 percent from 3.38 percent late Thursday.
The dollar mostly fell against other major currencies, while gold prices fell. Light, sweet crude rose 13 cents to settle at $66.02 per barrel on the New York Mercantile Exchange. The Russell 2000 index of smaller companies fell 2.81, or 0.5 percent, to 598.94.
Business, Pages 34 on 09/26/2009