Stocks Not Flying Now

"Rocky Balboa" is getting good reviews. But Thursday's Philadelphia Fed index makes you wonder if they are sympathy votes for that city's favorite celluloid son.

The stock market, which may be in the process of finding reasons to go down after a five-month rally, reacted sharply to December's reading of negative 4.3. But, Philly's problem isn't news, nor is the notion that manufacturing is weak nationwide. The November Institute of Supply Managers' manufacturing index showed contraction in the sector for the first time since 2003. But looking at other regions, the Philadelphia weakness simply counterbalances the recent above-average New York Fed's Empire State Index, which came in at 23.1.

"Average them out, you've still got soft landing," quips John Lonski, Moody's Investors Service chief economist.

Still, the markets didn't react in a balanced manner. The Dow Jones Industrial Average fell 0.3% to close at 12,421.25. The S&P 500 slipped 0.4% to close at 1418.31, and the Nasdaq Composite dropped 0.5% to close at 2415.85. The three major indices are all down on the week, with the Nasdaq off 1.7%. The S&P is down 0.6% and the Dow has slid 0.2%.

"The survey reminded us of the things that are wrong in the economy," says Randy Diamond, a trader at Miller Tabak.

In addition to the Philadelphia index, the government revised its final estimate of third-quarter GDP to 2% from its prior estimate of 2.2%. Metals prices also continued to fall Thursday, which dragged down basic materials stocks. Shares of Phelps Dodge(PD Quote) and Freeport McMoRan(FCX Quote), fell 2.1% and 6.1% respectively as copper fell another 3.5% to $2.86 per pound.