NEW YORK — Investors cashed in some of their recent gains Wednesday after the Federal Reserve gave them more confirmation that the economic recovery is slowing.
The Dow Jones industrial average fell almost 40 points after the Fed released its regional survey of the economy. The Fed said economic growth has been steady during the summer in Cleveland and Kansas City, but has slowed in Atlanta and Chicago. The central bank described economic activity elsewhere as modest.
The report had some sobering news about manufacturing, which had been one of the strongest parts of the economy.
While manufacturing expanded in most of the Fed’s 12 regions, about half - New York, Cleveland, Kansas City, Chicago, Atlanta and Richmond, Va. - said manufacturing had “slowed” or “leveled off.”
Investors weren’t surprised by the Fed report, but they also didn’t like hearing their own downbeat assessment of the economy confirmed by the central bank.
“It does reiterate that the economy is not bouncing back as much as we would hope,” Ryan Detrick, senior technical strategist chairman of Schaeffer’s Investment Research, said of the Fed report.
But Detrick also said the report gave investors an excuse to cash in some of their gains from the market’s rally late last week and early this week.
The Fed survey followed a disappointing Commerce Department durable-goods orders report earlier in the day. Orders for durable goods fell 1 percent in June. Economists expected a 1 percent gain.
Investors have been trying in recent weeks to balance strong earnings and corporate outlooks with economic data that isn’t as encouraging. A drop in consumer confidence Tuesday helped pushstocks mostly lower although another batch of robust earnings reports came out.
The Dow fell 39.81, or 0.4 percent, to 10,497.88 on Wednesday. The Standard & Poor’s 500 index fell 7.71, or 0.7 percent, to 1,106.13, while the Nasdaq composite index fell 23.69, or 1 percent, to 2,264.56.
Two stocks fell for everyone that rose on the New York Stock Exchange, where consolidated volume was 4.1 billion shares.
Volume has been light even by summer standards, which has added to the dayto-day volatility. Many investors have been staying out of the market while they try to get a clearer sense of how the economy is faring.
Treasury bill prices, which get a boost from bad economic news, rose after Wednesday’s reports were released. That sent interest rates lower. The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.99 percent from 3.05 percent compared with late Tuesday. That yield helps set interest rates on mortgages and other consumer loans.
David Hefty, chief executive officer of Cornerstone Wealth Management, said many investors are waiting for the government’s report Friday on the gross domestic product, the broadest measure of how the economy is doing.
Overseas, Britain’s FTSE 100 fell 0.9 percent, Germany’s DAX index dropped 0.5 percent, and France’s CAC-40 rose 0.1 percent. Japan’s Nikkei stock average jumped 2.7 percent.
Business, Pages 24 on 07/29/2010