Weak Data Pressure Stocks

BRENDAN CONWAY

NEW YORK—U.S. stocks fell, driven lower after a batch of glum economic data overseas and mixed readings at home, as investors closed out the market's worst quarter in years.

The Dow Jones Industrial Average fell 120 points, or 1.1%, to 11035 in late-morning trading. The Dow lost 10% for the quarter through Thursday's close, the biggest percentage decline since the first-quarter of 2009 and the worst point drop since the nadir of the financial crisis in late 2008.

The Standard & Poor's 500-stock index shed 17 points, or 1.4%, to 1144 in recent action while the Nasdaq Composite slid 35 points, or 1.5%, to 2444. Those two indexes are also closing out their worst quarterly performance in years.

Stocks pared their losses after Berkshire Hathaway's Warren Buffett said on CNBC that the company has already begun a closely watched stock-buyback program, also complimenting President Obama's efforts to jump-start the U.S. economy. But the relief was fleeting, as major stock indexes soon turned back lower.

"The market is putting a bow on what was an absolutely awful quarter," said Burt White, chief investment officer at LPL Financial in Boston. "Sentiment is awful, even though the underlying economic conditions aren't nearly as bad."

In economic data, Americans' income fell for the first time in nearly two years during August, the Commerce Department reported Friday, another sign of the U.S. consumer's continued difficulties. But the Thomson Reuters/University of Michigan consumer sentiment index showed a brighter view on the economy at the end of September, while a survey of Chicago-area purchasing managers was better than economists expected.

The tone was negative in U.S. markets before the data. Overseas, Europe was broadly lower, with the Stoxx Europe 600 down 1.6% on the session, and about 17% for the quarter. The annual inflation rate in the euro zone rose to 3% in September, the fastest rate in nearly three years and more than the 2.5% rate expected by economists. The rate was also well above the European Central Bank's target of just below 2%, which makes it less likely the ECB will lower interest rates.

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The Dow closed up 143 points on Thursday.

"You're definitely starting to see inflation begin to tick up a bit. A lot of that was in Germany," said LPL Financial's Mr. White. "The caution is whether that's going to crimp the ECB from doing what a lot of people want to see happen, which is to lower rates. It could be a disappointment to this market."

Financial, industrial and materials stocks led the S&P 500 lower, with financial shares among the blue-chip Dow's worst performers. J.P. Morgan Chase shed 2.7% and Bank of America lost 2.2%.

In corporate news, shares of Micron Technology dropped 11% after the chip maker reported a fiscal fourth-quarter loss, rather than the slight profit that analysts had expected, as sales and margins were negatively affected by declining average selling prices for PC memory.

Ingersoll-Rand sank 16% after the industrial conglomerate lowered its earnings and revenue outlook for the current quarter, citing weak demand in its consumer-related and commercial security businesses.

Orion Marine Group shed 1.3% after the marine construction and services company said its markets have experienced "uncertain and tough times," and weak economic growth and delays in federal spending should continue to put pressure on margins into the foreseeable future.

Elsewhere, McGraw-Hill is in advanced talks to combine its S&P Indices with CME Group's Dow Jones Indexes, according to a report in The Wall Street Journal. If completed, the deal would leave CME with a stake of about 25%. McGraw-Hill fell 3.5% and CME Group shed 3.4%.