NEW YORK - Wall Street couldn’t shrug off doubts about the economy and government gridlock Tuesday.
Mixed economic reports and concern about a government shutdown dragged stocks lower in the final half hour of trading. They had been positive most of the day.
The modest losses extended the losing streak for the Standard & Poor’s 500 index to four days. It was the longest run of declines in a month. The Dow Jones industrial average also dropped for a fourth straight day.
On Tuesday, the Dow closed down 66 points, 0.4 percent, to 15,334. The S&P 500 index fell 4 points, or 0.3 percent, to 1,697. The Nasdaq composite, however, edged up 3 points, or 0.1 percent, to 3,768.
Stocks edged lower in early trading, before reversing the losses to move modestly higher by late morning. The gains then fizzled out.
Investors struggled with conflicting news about the economy on Tuesday. One report showed that home prices in July rose the most in more than seven years. Another showed that Americans’ confidence in the economy slipped in September.
Investors are searching for direction after the Federal Reserve’s surprise decision last Wednesday to keep its stimulus program intact. They had expected a reduction in the Fed’s $85 billion in monthly bond purchases. Investors are now parsing economic reports and comments from Fed officials to gauge the central bank’s next move.
Some are also nervous about political gridlock in Washington. There is concern that the federal government could shut down because Washington lawmakers appear to be making little progress in budget talks.
“A government shutdown starting next week is looking increasingly likely,” said Jim Russell, a regional investment director at U.S. Bank. “That will not be welcomed by the capital markets.”
But Brad Sorensen, director of market and sector research at Charles Schwab, thought that worries about a government shutdown would ultimately be short-lived.
“Investors are becoming a little bit immune to the games that Washington has started to play,” Sorensen said. “Investors with a stronger stomach should probably buy the dip.”
Stocks, for example, plummeted in the summer of 2011 as lawmakers wrangled about raising the debt ceiling. The market also sagged in October2012 before the presidential elections, on concerns that a divided government would be unable to agree on tax changes. Each time though, backed by the Fed’s economic stimulus, the market came back stronger.
After falling 2 percent in October last year, the Standard & Poor’s 500 index rose for seven straight months, gaining 15 percent.
Phone company stocks were the biggest decliners among the 10 industry groups that form the S&P 500. Industrial stocks were the biggest gainers.
In government bond trading, the yield on the 10-year Treasury note fell as investors bought bonds. The yield dropped from 2.7 percent late Monday to 2.66 percent, its lowest level in six weeks. The yield on the note is a benchmark for rates of consumer loans.
Business, Pages 26 on 09/25/2013