- 06Jul
(Reuters) - Stocks fell slightly on Wednesday after a downgrade of Portugal's credit rating, China's interest rate rise and a soft report on the U.S. services sector sparked jitters about global growth prospects.
The downgrading of Portugal's credit rating to "junk" by Moody's shocked financial markets and cast new doubt on European efforts to rescue distressed euro zone states without debt restructuring.China's central bank increased interest rates for the third time this year on Wednesday, making clear that taming inflation is a top priority as itseconomy gently slows.
The Institute for Supply Management services index showed the pace of growth in the U.S. services sector dipped modestly in June, while prices paid fell sharply to its lowest level since August 2010.
"The combination of China raising rates and this services report is kind of giving the market some pause," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
The S&P 500 has been fluctuating in a range from about 1,250 to 1,350 for the last several months, with flare-ups in the euro zone debt crisis often serving as a catalyst for profit-taking.
"It's kind of a cumulative effect. You don't have good economic data coming out here, you don't have the earnings reports flowing and all of a sudden bad news comes from Europe. It all kind of brings the market down," said Jankovskis.
The Dow Jones industrial average .DJI dropped 21.01 points, or 0.17 percent, to 12,548.86. The Standard & Poor's 500 Index .SPX dropped 6.30 points, or 0.47 percent, to 1,331.58. The Nasdaq Composite Index .IXIC dropped 12.00 points, or 0.42 percent, to 2,813.77.
Volume has been light, a trend expected to continue in the holiday-shortened week and to add to volatility. Markets were closed on Monday for U.S. Independence Day.
Banks were among the worst performers, with the KBW Bank index .BKX off 1.3 percent and S&P financial sector index .GSPF down 1.2 percent. JPMorgan Chase & Co (JPM.N) fell 1.9 percent to $40.25.
Reflecting concerns about the euro zone debt crisis, the iShares MSCI Italy index (EWI.P) and the iShares MSCI Spain index (EWP.P) both lost more than 3 percent.
(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)
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