U.S. stock futures were mixed Wednesday ahead of a flood of economic indicators and corporate earnings, after a lukewarm report on jobs. | AP Photo
Updated: May 1, 2013 3:30PM
NEW YORK — The stock market fell the most in two weeks as the outlook for the economy grew dimmer.
The Dow Jones industrial average fell 138 points to close at 14,701 Wednesday. The Standard & Poor’s 500 dropped 14 to 1,582. The Nasdaq lost 29 points to 3,299.
All three indexes fell 0.9 percent.
Small-company stocks fell more than the rest of the market. The Russell 2000 index sank 2.5 percent.
Stocks sagged following a slowdown in hiring and manufacturing last month. Big-name companies reported disappointing results.
Bond yields fell as investors sought safety. The yield on the 10-year Treasury note fell to 1.63 percent, its lowest of the year.
Three stocks fell for every one that rose on the New York Stock Exchange. Volume was below average at 3.4 billion shares. Worries about a slowing economy tugged the stock market lower Wednesday.
Stocks were hurt by a report that showed U.S. factory activity fell to its slowest pace of 2013 last month as manufacturers pulled back on hiring and cut stockpiles. Another report said companies added just 119,000 jobs in April, the fewest in seven months.
“Investors are going to be rattled by these numbers,” said Colleen Supran, a principal at San Francisco based-Bingham, Osborn & Scarborough.
The S&P 500 reached record highs in April and has risen every month in 2013, gaining 12 percent so far. For the most part, the market has shrugged off any signs of weakness in the economy.
Company earnings were also in the spotlight Wednesday.
Drugmaker Merck & Co. fell $1.30, or 2.8 percent, to $45.70 after it cut its 2013 profit forecast. The company said competition from generic versions of its drugs and unfavorable exchange rates hurt its profit.
MasterCard eased $9.14, or 1.7 percent, to $543.70 after the payments processing company reported that revenue missed the expectations of financial analysts who cover the firm.
About two thirds of companies in the S&P 500 index have announced earnings for the first quarter.
The quarterly earnings are at record levels, and about seven of 10 companies have topped forecasts of Wall Street analysts, according to S&P Capital IQ data. Revenues have disappointed, though, with about six of 10 companies falling short of expectations. That suggests companies are raising profits through cutting costs rather than boosting revenues.
After companies finish reporting quarterly results, earnings are expected to grow by 3.9 percent in the first quarter. Then they’ll accelerate throughout the year, reaching 12 percent growth in the final quarter, according to S&P Capital IQ.
But some market watchers were cautious.
“From here on out, this market expansion story from cost-cutting, it’s hard to believe it’s going to continue much longer,” said Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America Merrill Lynch. “We need some kind of top-line or demand recovery. If we don’t see that, then the equity market is toast.”
Government spending cuts will likely slow economic growth in the current quarter, according to the investment bank arm of Bank of America. Growth will pick up toward the end of the year, helped by the housing market’s recovery.
Among other stocks making big moves, home security company ADT fell $1.74, or 4 percent, to $41.90 after its profit didn’t live up to analysts’ hopes.
T-Mobile USA Inc., the combination of T-Mobile USA and MetroPCS, rose 88 cents, or 5.7 percent, to $16.45 on its first day of trading. Goldman Sachs analysts opened their coverage of the stock with a “buy” recommendation and a 12-month price target of $22, predicting that the company will benefit from further consolidation in the industry.
Markets in Europe were closed for the May Day holiday.
The start of the new month will also remind investors of the investing adage “Sell in May and go away.”
In at least the last two years, stock gains at the beginning of the year have been followed by late spring-early summer swoons. In 2012 stocks plunged in May on growing concern that Spain and Italy would be sucked deeper into Europe’s debt crisis. The year before, wrangling about the U.S. debt ceiling rattled markets.
Since 1970, the S&P 500 has generated an annualized return of 4.1 percent from May through October, well below the 17.2 percent annualized return from May through October.