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Stocks retreated Tuesday as weak readings on manufacturing and jobs offset a a report that showed the economy wasn't in as bad a shape as first expected over the summer.
The Chicago purchasing-manager's index fell to 46.1 in September from 50 in August. A reading of 50 or higher indicates expansion; below that, contraction.
The Chicago report isn't usually a market-mover, as it's more volatile than the national ISM reading, due out tomorrow. Still, economists suggested that the ISM number may be lower due to this report. Economists expect to see the ISM gauge to tick up to 54 from 52.9 in August.
On the jobs front, ADP said private employers cut 254,000 jobs from their payrolls in September, more than expected but less than the revised 277,000 loss recorded in August.
The ADP report is closely watched as it comes out before the government's September jobs report, which is due out on Friday. Economists surveyed by Reuters expect to see that 180,000 jobs were lost this month, compared with 216,000 in August.
Meanwhile, the economy contracted at a 0.7-percent rate in the second quarter, the government said in its final reading on the quarter. That was less than the 1-percent decline reported in the prior reading.
Oil pulled back, trading below $67 a barrel.
Bank of America [BAC
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] shares skidded after the bank said it's selling its asset-management unit to Ameriprise [AMP
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] for about $1 billion.
Goldman Sachs [GS
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] got a boost after two brokerage firms — Bernstein and KBW — raised their outlooks for the Wall Street titan.
Shares of CIT Group [CIT
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] tumbled more than 30 percent as the commercial lender is nearing a plan to hand itself over to bondholders. If they can't get get bondholders on board, the company may be forced to file for bankruptcy protection.
Discovery Laboratories [DSCO
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] shares surged more than 30 percent after the small-cap pharma said government regulators had agreed to the firm's plan to settle questions over its experimental lung drug.
Despite today's losses, the Dow, the S&P 500, and the Nasdaq are all up strongly for September, traditionally the worst month of the year for stocks.
And the Dow may set an all time record for quarterly point gain: as of now, the Dow has a gain of 1295.20 for the quarter. The current record is 1338.81, set in the fourth quarter of 1998.
As of right now, both the Dow and the S&P 500 have their best percentage gains since that quarter, with the Nasdaq having its best percentage gain since the second quarter of 2003.
The busy week for Fed commentary continues: Fed Vice Chairman Donald Kohn participates in a panel discussion at the Cato Institute's meeting of the Shadow Open Market Committee at 12:35 pm, and Fed Governor Daniel Tarullo testifies before a Senate subcommittee on the topic of financial regulation reform at 2:30 pm.
Elsewhere on the calendar, the SEC finishes a two day public hearing on possible changes to rules regarding short sales, while pay czar Kenneth Feinberg will speak in Chicago on executive compensation reform.
Nike [NKE
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] shares rose sharply after the sneaker maker beat earnings estimates.
Hewlett-Packard [HPQ
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] shares slipped after the Wall Street Journal reported the company may combine its printer and PC divisions.
Wynn Resorts [WYNN
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] slipped despite the fact that the company saw its Asian IPO price at the top of the estimated range.
In the pharma sector, Johnson & Johnson [JNJ
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] and Boston Scientific [BSX
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] have settled a patent infringement lawsuit over heart stents, with Boston Scientific paying J&J $716.3 million.
Still to Come:
THURSDAY: Personal income/spending; jobless claims; ISM manufacturing index; pending-home sales; construction spending; auto sales; Fed's Bernanke, Pianalto, Lockhart speak
FRIDAY: Sept jobs report; factory orders; Calif. IOUs mature
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