September 26, 2009 in City

Twin reports a drag, extend losses

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NEW YORK – Investor confidence suffered another blow Friday as disappointing reports on manufacturing and home sales stirred worries that the economy will struggle to recover.

Stocks fell for a third straight day to post their biggest weekly losses since early July. The reports on durable goods and sales of new homes reminded investors that while the economy might be improving, it might not do so in a straight line.

The Dow Jones industrial average fell 42 points, bringing its three-day loss to 165.

The week’s economic reports have hit shares of industrial companies, which have been logging big gains as investors pile into stocks of companies that could see big jumps in profits if the economy improves. The reports ran counter to other data that had boosted hopes for a rebound in manufacturing.

The day’s losses – and even those for the week – are still modest considering how far stocks have rocketed since major indicators tumbled to 12-year lows on March 9. The Standard & Poor’s 500 index, the basis for many mutual funds, is up 54.4 percent since then. Analysts have been calling for a break in the advance so the economy can catch up with investors’ expectations.

The week’s economic data marked an improvement from a few months ago but still disappointed the market by coming in well shy of analysts’ expectations – a sign that investors might be underestimating how long it will take for the economy to recover. The market will likely need more convincing evidence that the economy is on track before moving higher again.

Next week’s heavy calendar of economic reports could help provide more clarity about how the recovery is going. On Friday, the Labor Department will release its monthly employment figures, one of the most closely watched economic reports. Other figures are expected on consumer confidence, manufacturing, factory orders and home prices.

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