Update: Stocks fall after weak manufacturing reports

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By Associated Press

NEW YORK (AP) — Stocks fell Thursday following new signs that the recovery remains tepid even as companies report strong earnings.

Regional manufacturing indexes in New York and Philadelphia plummeted this month, but a national report showed modest growth in industrial output nationwide. The government also reported that first-time claims for unemployment benefits fell, but that was largely because of seasonal factors.

The Dow Jones industrial average fell 79 points, putting its seven-day winning streak in severe jeopardy.

Industrial companies like Caterpillar Inc., General Electric Co. and United Technologies Corp. all fell after the weak manufacturing reports.

JPMorgan Chase & Co. was the latest company to report big profits, following Intel Corp. and Alcoa Inc. earlier in the week. The bank also cut down its loan-loss reserves, which could be a sign that mortgage and loan defaults are moderating.

However, JPMorgan's CEO Jamie Dimon still struck a cautious tone about future economic growth.

"Earnings are strong," said Sandy Mehta, principal and chief investment officer of Value Investment Principals. "But the underlying economy is not as strong."

Mehta said investors are readjusting their views for future economic growth after being disappointed by economic reports in May and June.

Upbeat earnings have helped markets avoid big dips, even after the Federal Reserve cut its forecast for future economic growth Wednesday.

The Dow Jones industrial average fell 79.24, or 0.8 percent, to 10,287.79. The Standard & Poor's 500 index fell 8.74, or 0.8 percent, to 1,086.43, while the Nasdaq composite index fell 14.77, or 0.7 percent, to 2,235.07.

About two stocks fell for every one that rose on the New York Stock Exchange where volume came to 137 million shares, about even with volume at the same time Wednesday.

JPMorgan Chase shares dipped 46 cents to $39.89 as the broader market fell. Caterpillar fell $1.20 to $65.50, while GE dropped 20 cents to $15.00. United Technologies fell 58 cents to $67.43.

The steep drop in the Empire State and Philly Fed Manufacturing indexes dented optimism that had been seen in recent days following strong earnings. Manufacturing had shown the most consistent growth coming out of the recession, but now data is indicating it too is slowing down heading into the second half of the year.

The Empire State index fell to 5.08, well below the 18.50 economists had predicted and the 19.57 reported last month. The Philadelphia Fed index dropped to 5.1 for July. Economists had predicted it would rise to 10.0.

The government's national report showed output at the nation's factories, mines and utilities rose by 0.1 percent in June, better than the 0.1 percent drop economists forecast.

Initial jobless claims fell by 29,000 to a seasonally adjusted 429,000, the lowest level since August 2008. Economists polled by Thomson Reuters had predicted claims would drop to 450,000.

However, the claims could be skewed because General Motors and other manufacturers skipped their usual July shutdowns. Normally that would lead to temporary seasonal layoffs, which did not show up in the latest figures.

Meanwhile, inflation before goods reach the consumer level fell more than expected last month. It dropped 0.5 percent, compared with a forecast for a decline of 0.1 percent.

A drop in energy costs and the biggest plunge in food costs in eight years kept inflation at bay. The drop in prices should allow the Federal Reserve to hold key interest rates at historically low levels to try and stimulate the economy.

The Dow eked out a gain of 4 points Wednesday to extend its winning streak to seven days. However, the S&P 500 snapped its run of gains by falling less than 1 point. The Fed cut its outlook for the gross domestic product, the broadest measure of the economy. Its pessimism about the pace of recovery dampened earlier gains that followed upbeat earnings from Intel.

The euro climbed above $1.28 for the first time in more than two months Thursday as investors worried about the strength in the U.S.

Bond prices rose as investors sought safety after the mixed economic reports. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.01 percent from 3.05 percent late Wednesday.

The Russell 2000 index of smaller companies fell 4.77, or 0.8 percent, at 635.39.

Overseas, Britain's FTSE 100 fell 0.2 percent, Germany's DAX index gained 0.1 percent, and France's CAC-40 fell 0.4 percent. Japan's Nikkei stock average fell 1.1 percent.