New York – Stocks fell hard for a second day Wednesday, with the Dow Jones industrial average losing more than 120 points after a surprisingly weak reading on the service sector of the economy raised concerns about the continuing impact of higher energy prices.
Equities opened lower after Tuesday’s sell-off, then fell further when the Institute for Supply Management reported that its nonmanufacturing business index, which measures the service sector, dropped to 53.3 in September from 65.0 in August. While any reading above 50 indicates the economy is expanding, the sharp drop was unexpected, following a strong report in manufacturing this month.
Wednesday’s reading, which indicated supply managers were worried about higher energy costs, spooked investors already nervous about the effects that rising oil and gas prices will have going forward.
The market was still mulling Tuesday’s comments from Dallas Federal Reserve Bank president Robert Fisher, who said inflation was nearing the high end of the Fed’s comfort zone – a clear signal that short-term interest rate hikes would continue. The higher prices for energy have been filtering into the rest of the economy.
Investors are also jittery about earnings season, which officially starts Monday. Some companies such as Clorox Co. have already begun to warn that their earnings will not meet expectations.
“We need to get (earnings season) out of the way and see how companies are doing,” said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee.
The Dow industrial average fell 123.75, 1.19 percent, to 10,317.36. That followed a drop of 94.37, 0.9 percent, on Tuesday.
The Standard & Poor’s 500 index fell 18.08, 1.49 percent, to 1,196.39, and the Nasdaq composite index fell 36.34, 1.7 percent, to 2,103.02. The major indexes are at their lowest points since the week of July 4.
The Bloomberg Colorado Index, a price-weighted list of companies based in the state, lost 8.19, or 2.6 percent, to 307.24. It was the biggest drop since April 28. More than six stocks fell for every one that rose and five were unchanged.
