NEW YORK — Investors cashed in some of their recent gains Wednesday after the Federal Reserve gave them more confirmation that the economic recovery is slowing.
The Dow Jones industrial average fell almost 40 points after the Fed released its regional survey of the economy, known as the “Beige Book.” The Fed said economic growth has been steady during the summer in Cleveland and Kansas City but has slowed in Atlanta and Chicago. The central bank described economic activity elsewhere as modest.
The report had some sobering news about manufacturing, which had been one of the strongest parts of the economy. While manufacturing expanded in most of the Fed’s 12 regions, about half — New York, Cleveland, Kansas City, Chicago, Atlanta and Richmond, Va. — said manufacturing “slowed” or “leveled off.”
Investors weren’t surprised by the Fed report, but they also didn’t like hearing their own downbeat assessment of the economy confirmed by the central bank.
“It does reiterate that the economy is not bouncing back as much as we would hope,” Ryan Detrick, senior technical-strategist chairman of Schaeffer’s Investment Research, said of the Beige Book.
But Detrick also said the report gave investors an excuse to cash in some of their gains from the market’s rally late last week and early this week.
The Dow rose almost 420 points in four days as investors bought stocks in response to companies’ strong second-quarter earnings and upbeat forecasts for the rest of the year.
The Fed survey followed a disappointing Commerce Department report that orders for durable goods fell 1 percent in June.
Investors have been trying in recent weeks to balance strong earnings and corporate outlooks with economic data that aren’t as encouraging. A drop in consumer confidence Tuesday helped push stocks mostly lower.
“The biggest issue the market is looking at is whether the soft patch in economic data is likely to continue,” said Michael Sheldon, chief market strategist for RDM Financial Group. “Investors wonder if the strong earnings reports that we have seen are more backwards as opposed to forwards-looking.”
The Dow fell 39.81 to 10,497.88. The Standard & Poor’s 500 fell 7.71 to 1,106.13, while the Nasdaq composite fell 23.69 to 2,264.56.
David Hefty, chief executive of Cornerstone Wealth Management, said many investors are waiting for Friday’s government report on the gross domestic product before making any big investing moves.
