Worse-than-expected Economic Data Thwart Rally

MADLEN READ

NEW YORK (AP) — Investors broke the stock market's four-day rally and sold off after U.S. data on the services industry and factory orders came in below forecasts. Factory orders actually rose in April, but the report was a disappointment to investors, who had anticipated a larger increase.

The Dow Jones industrial average fell nearly 66 points, or 0.8 percent, while the Standard & Poor's 500 index fell 1.4 percent. The Nasdaq composite index, which has been outperforming the other indicators this year, fell just 0.6 percent.

Since the Dow sank to its 12-year low in early March, optimism about the economy's stabilization has buoyed the index by more than 30 percent. Over those three months, topping investors' expectations meant clearing a relatively low bar.

Alan Gayle, senior investment strategist at RidgeWorth Capital Management, said he began increasing his stock holdings in March on signs that economic data was becoming "less bad."

But now, Gayle said, "'less bad' is not good enough."

Even Federal Reserve Chairman Ben Bernanke was no longer emphasizing signs of economic stabilization on Wednesday, as he has done in recent months. In testimony to Congress, Bernanke focused instead on the government's growing debt load, saying that failing to ease the deficit could undermine efforts to revitalize the economy.