Dow Ends Down 43 on Manufacturing News

Alfred Hayward, right, and James Barry, left, both of Labranche & Co. LLC, talk in front of the New York Stock Exchange, Wednesday, Dec. 20, 2006, in New York. The New York Stock Exchange said its shareholders approved its planned $14.3 billion acquisition of the Paris-based Euronext NV in a deal that would create the first trans-Atlantic securities market and set the stage for further expansion. (AP Photo/Henny Ray Abrams) (Henny Ray Abrams - AP)

NEW YORK -- Stocks pulled back Thursday after economic data pointing to weakness in regional manufacturing and a slowing U.S. economy weighed on investor sentiment. Trading was light ahead of the holiday weekend.

Stocks fell after the Philadelphia Federal Reserve's December business index, which gauges regional manufacturing activity, came in at a negative 4.3 compared with a positive reading of 5.1 in November. It was the weakest showing since 2003.

Before release of the Philadelphia Fed report, investors shrugged off news that the economy grew at a slower pace in the third quarter than had been estimated. Gross domestic product fell to 2 percent in the third quarter amid a cooling real estate market; the Commerce Department estimated a month ago that the reading would be closer to 2.2 percent.

"I think with the low volume nobody is really around to trade the stuff," said Ryan Larson, senior equity trader at Voyageur Asset Management, a unit of RBC Dain Rauscher. "So I wouldn't put too much credence in this pullback."

The Dow Jones industrial average fell 42.62, or 0.34 percent, to 12,421.25.

Broader stock indicators also lost ground. The Standard & Poor's 500 index slipped 5.23, or 0.37 percent, to 1,418.30, and the Nasdaq composite index lost 11.76, or 0.48 percent, falling to 2,415.85.

Materials stocks, hurt by declining prices of metal and copper, were among the laggards Thursday. Alcoa Inc. was the weakest of the 30 stocks that comprise the Dow, falling 74 cents, or 2.5 percent, to $29.30.

Bonds rose sharply on the weaker economic data, with the yield on the benchmark 10-year Treasury note falling to 4.55 percent from 4.60 percent late Wednesday. The dollar was lower against other major currencies, while gold prices fell.

Light, sweet crude oil fell $1.06 to $62.66 per barrel on the New York Mercantile Exchange.

Comments from Richmond Federal Reserve President Jeffrey M. Lacker, who has long warned of the threat of inflation to the economy, further dented sentiment Thursday. According to prepared remarks of a speech in Charlotte, N.C., Lacker said: "The risk that core inflation surges again, or does not subside as desired, clearly remains the predominant macroeconomic policy risk."

Larson noted that the comments weren't surprising as Lacker has dissented in the central bank's recent decisions to leave short-term interest rates unchanged.

The Fed left rates unchanged at its last four meetings after raising rates 17 straight times since 2004 in an attempt to cool the economy and curb inflation. Wall Street has been waiting to see whether the central bank can steer the economy toward a soft landing or whether growth will slow too quickly and push the economy into recession.