Stocks fell Monday after further signs of slowing growth added to caution ahead of the government's crucial jobs report later in the week.
The Dow Jones industrial average fell nearly 50 points in afternoon trading. Broader indexes also dropped. With investors concerned about the health of the economy, money again flowed into the bond market, sending interest rates lower.
A report Monday showed personal income rose less than expected in July, adding to the string of data that points toward a slowdown in growth during the second half of the year.
"The personal income report did little to ease the nervousness about the trajectory of the economy," said Alan Gayle, senior investment strategist at RidgeWorth Investments. The report did show spending was up in July, but without consistent growth in income, any increase in spending is likely temporary, Gayle said.
Investors have been focusing on employment data as a key way of predicting where the economy is going. Signs of a slowdown in growth has plagued the market for more than a month. Investors are unsure if companies will be able to keep up strong earnings growth if the recovery runs out of steam or falls back into recession. And consumers aren't likely to spend more until there are clear and regular signs of hiring.
"You have to prepare for slower growth," said Mark Tepper, managing partner at Strategic Wealth Partners. "As consumer spending goes down, businesses will experience lower earnings."
Investors have been betting in recent weeks that the weaker economic reports will translate into smaller earnings that previously thought. That, in turn, has helped drive stocks lower to match the diminished expectations.
Several stocks were moving on the latest flurry of corporate news. Genzyme Corp. rose after rejecting Sanofi-Aventis SA's $18.5 billion takeover offer, while Hewlett-Packard Co. rose after saying it plans to buy back stock. Cogent Inc. jumped after agreeing to be acquired by 3M Co.
In afternoon trading, the Dow fell 47.57, or 0.5 percent, to 10,103.27. The Standard & Poor's 500 index fell 4.92, or 0.5 percent, to 1,059.67, while the Nasdaq composite index fell 11.16, or 0.5 percent, to 2,142.47.
About two stocks fell for every one that rose on the New York Stock Exchange, where volume was 297.9 million. Volume has been light over the past month as investor uncertainty keeps some traders out of the market completely.
The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.55 percent from 2.65 percent late Friday. Its yield is often used to set interest rates on mortgages and other consumer loans.
Biotechnology company Genzyme said Sanofi-Aventis' $69 per share offer undervalues the company. Genzyme shares jumped $2.53, or 3.7 percent, to $70.15, while Sanofi fell 1 cent to $28.91.
Cogent jumped $1.89, or 21.1 percent, to $10.80 after manufacturer 3M said it would buy the maker of fingerprint scanners for $10.50 a share. Shares of 3M dipped 58 cents to $80.42.
Hewlett-Packard said it plans to repurchase $10 billion in stock. The computer company plans to buy back shares, in part, to offset dilution from employee stock plans. Hewlett-Packard shares rose $1.07, or 2.8 percent, to $39.07.
Stocks have largely been moving on major economic reports and less on individual corporate news during the past month. Because the Labor Department's monthly employment report doesn't come until Friday, investors will look for signs earlier in the week about the jobs market.
In economic news Monday, the Commerce Department said personal income rose 0.2 percent last month, falling below economists' forecast for 0.3 percent growth, according to Thomson Reuters.
Personal spending did climb 0.4 percent in July, the biggest jump in four months. Economists had forecast spending would rise 0.3 percent. But with income and hiring still sluggish, analysts say shoppers won't be consistently spending more.
The Institute for Supply Management releases its monthly manufacturing survey Wednesday, which has an employment component to it. Payroll company ADP also releases its data on private jobs growth Wednesday.
The Labor Department releases its weekly report on unemployment claims Thursday. New claims fell last week, but remain at elevated levels. That indicate employers are not adding new workers, even if they aren't firing too many employees either.
Japanese markets surged overnight after the country's central bank approved new stimulus measures aimed at sparking growth and putting the brakes on a strengthening yen. The yen recently hit a 15-year high against the dollar, which hurts Japanese manufacturers, like Sony Corp., Panasonic Corp. and Toyota Motor Corp., that rely heavily on exports. Japan's Nikkei stock average rose 1.8 percent.