By STEVEN RUSSOLILLO
NEW YORK—U.S. stocks dropped as a downward revision of domestic economic growth and rising European bond yields weighed on investor sentiment.
Markets reporter Brendan Conway joins the News Hub to outline factors impacting the markets on Tuesday, including ratings agencies saying a U.S. credit decline is off the table. AP Photo.
The Standard & Poor's 500-stock index dropped 8 points, or 0.7%, to 1185 late morning. The technology-oriented Nasdaq Composite lost 17 points, or 0.7%, to 2505.
Stocks had turned lower in premarket action after the Commerce Department reported its second estimate of third-quarter growth grew less than initially thought before steadying.
Gross domestic product grew at an inflation-adjusted annual rate of 2.0% in the July-to-September period, lower than the advance estimate of 2.5%. Economists surveyed by Dow Jones Newswires expected a revised figure of 2.3%. A big downward revision to inventory investment dragged down the GDP number, while corporate profits notched steady gains.
"Any potential relief rally was dampened by the revised third-quarter growth figures," said Scott Armiger, portfolio manager at Christiana Trust. "We need 2% growth just for job creation to keep up with population growth, let alone rehire those millions of workers that we've lost."
Investors initially expressed relief after Standard & Poor's, Moody's Investors Service and Fitch Ratings said late Monday there would be no immediate downgrades of U.S. sovereign debt. The decisions came after the deficit-cutting supercommittee failed to reach a budget deal.
S&P said it wouldn't change its rating as long as long as caps on discretionary spending laid out in August remain in force. Moody's and Fitch acknowledged that the latest budget development does put pressure on the U.S.'s rating.
European markets reversed early gains and edged lower, with the Stoxx Europe 600 dropping 0.5%, adding to the 5.2% decline over the previous three sessions. Investors fretted over rising yields seen at a Spanish bill auction. The average yield on three-month bills rose to 5.11% from 2.292% at a previous auction for similar maturities on Oct. 25. That was above the yield offered by Greece paid at its last three-month auction a week ago.
Asian bourses were mixed, with Japan's Nikkei Stock Average losing 0.4% but Hong Kong's Hang Seng Index edging up 0.1%.
Gold futures climbed 1.1% to $1,696 an ounce, while crude oil futures rose 0.2% to $97.08 a barrel. The U.S. dollar lost ground against the euro, but gained against the yen.
The Federal Reserve Bank of Richmond reported its manufacturing index improved last month. It came in at 0 in November, from -6 in the prior month.
The Fed plans to release the minutes from its monetary-policy meeting in November at 2 p.m.
Hewlett-Packard led the Dow lower, dropping 4%, after the technology company provided a downbeat earnings outlook for the current quarter and the next fiscal year.
Netflix hit its lowest point in more than a year. The Internet video company said it was raising $400 million in cash and warned that it would report a loss in 2012. Shares fell 3.2%.
Brocade Communications climbed 9.9% after the networking gear maker reported better-than-expected earnings and revenue for the fiscal fourth quarter.
Campbell Soup's fiscal first-quarter earnings fell 5%, though its soup business showed some signs of stabilizing. Revenue also came in lower than analysts expected. Shares skidded 6.3%.
Medtronic's fiscal second-quarter earnings rose 54% as the medical-device maker reported growth across most of its businesses. Shares rose 3.6%.
Focus Media Holding denied accusations by short seller Muddy Waters that it fraudulently overstated the number of screens in its LCD network and overpaid for acquisitions, saying they were "inconsistent with the facts." The stock rose 4.2%.
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