Recovery hopes dim a bit on latest economic reports

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Some economic green shoots are showing signs of wilting, giving Wall Street an excuse to take profits from the spring stock market surge.

The Dow Jones industrials were off 185 points, or 2.1%, to 8,613 at about 12:40 p.m. PDT. It was just on Friday that the Dow had erased the last of its 2009 losses.

A Federal Reserve index of manufacturing activity in the New York region showed a decline this month from May levels, the Fed said today. The index came in at minus 9.41, compared with minus 4.55 in May. The trend had been improving in April and May, after a horrendous reading of minus 38.23 in March.

A reading below zero indicates manufacturing in the region is contracting.

Still, the report wasn’t as bad as it looked, as Bloomberg News notes:

‘Factory executives in the New York Fed’s district, which encompasses New York state, northern New Jersey and one county in Connecticut, turned more optimistic about the future. A gauge measuring the manufacturing outlook climbed to 47.8, the highest since July 2007, from 43.8.

‘A measure of employment improved to minus 21.8 from minus 23.9.

‘Although the main reading was ‘disappointing from the perspective of the stabilization story, the details of the report were not as weak as the headline,’ John Ryding, chief economist at RDQ Economics in New York, wrote in a note to clients.’

Separately, the National Assn. of Home Builders/Wells Fargo index of builder confidence slipped this month, the first reversal since January. The confidence index eased to 15 from 16 in May. It had hit bottom at 8 in January. Any reading below 50 indicates poor housing-market conditions.

“As expected, the housing market continues to bump along trying to find a bottom,” said NAHB Chief Economist David Crowe.

Builders’ stocks are getting pounded today. KB Home was down 84 cents, or 6%, to $13.25; Pulte Homes was down 26 cents, or 3%, to $8.56.

But investors have been pulling back from many of the builders since early May, when KB Home got as high as $19.50 and Pulte reached $12.30.

-- Tom Petruno