Drop in Durable Orders Pressures Stocks

A larger-than-expected decline in durable orders deepened Wall Street’s concerns about the economy Thursday and pressured stocks. The major indexes shook off earlier losses to claim modest gains at midday, but the overall market saw more share prices fall than rise.

Investors are worried that after six months of rallies, stocks have climbed too high given a still questionable economic recovery.

“There is doubt at these levels … that we have further gains this year. We are now looking for reasons to justify our worry,” said Brian Pears, equity trader at Victory Capital Management in Cleveland.

But Pears also said investors’ desire to own stocks outweighs their temptation shun them.

In early afternoon trading, the tech-dominated Nasdaq rose 6.01, or 0.3 percent, at 1,849.71, following Tuesday’s drop of 58.02, its largest one-day point loss since July 1, 2002.

The market’s other gauges were also higher, having suffered their biggest losses in just over four months, or since May 19. The Dow Jones industrial average rose 10.45, or 0.1 percent, to 9,435.96, having slid 150.03 Wednesday. The Standard & Poor’s 500 index advanced 4.33, or 0.4 percent, to 1,013.71, having shed 19.65 in the previous session.

Investors were extending Wednesday’s huge sell-off, sparked by a surprising decision by OPEC to cut oil production target by 3.5 percent beginning in November. The move by the Organization of Petroleum Exporting Countries, which produces about a third of the world’s crude, set off worries that higher energy prices will hamper the economic recovery.

The Commerce Department issued disappointing economic data showing demand for durable goods dropped by a sizable 0.9 percent in August, raising doubts about the manufacturing sector’s delicate recovery. The decrease in new orders for durable goods, items including cars and home appliances expected to last at least three years, was the first and largest decline in four months and bigger than the 0.5 percent dip economists anticipated.

Manufacturers were mixed following new of the drop in durable goods orders. Caterpillar Inc. fell 70 cents to $69.74, but General Motors Corp. rose 27 cents to $41.09. Both are Dow components.

In a second report, new applications for jobless benefits fell last week by a seasonally adjusted 19,000 to 381,000, a seven-month low, the Labor Department said. But at least half of the decrease was attributable to workers not being able to file claims because of Hurricane Isabel, which hit the East Coast, a department analyst said.

Retailer Bed, Bath & Beyond Inc. rose $1.34 to $40.76, having reported quarterly profits late Wednesday that beat analysts’ expectations by 2 cents a share.

OPEC’s news boosted oil stocks including Royal Dutch Petroleum Co., up 36 cents at $45.36, and Exxon Mobil Corp., up 51 cents at $37.41.

Walt Disney Co. advanced 81 cents to $20.62 after Goldman Sachs upgraded it to “outperform” from “in-line.”

Darden Restaurants Inc., which operates the Olive Garden and Red Lobster chains, fell $2.39 to $18.98 after Raymond James downgraded it to “market perform” from “strong buy” and CIBC World Markets cut its rating to “sector underperform” from “sector perform.”

The Russell 2000 index, which tracks smaller company stocks, fell 3.84, or 0.8 percent, to 504.02.

Declining issues outnumbered advancers more than 4 to 3 on the New York Stock Exchange. Trading volume was light.

Overseas, Japan’s Nikkei stock average finished Thursday down 1.8 percent. In Europe, France’s CAC-40 fell 1 percent, Britain’s FTSE 100 declined 0.8 percent and Germany’s DAX index gained 1.3 percent.

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