Dawn Chorus: Smaller-than-expected rise in personal incomes weigh on Wall Street

Wall Street inched lower on Monday in response to a smaller-than-expected increase in personal incomes adding to concern the economic rebound may slow further.

The Dow Jones industrial average dropped 141 points, or 1.4%, to 10,010. The Standard & Poor's 500 lost 16 points, or 1.5%, to 1,049. The Nasdaq Composite fell 34 points, or 1.6%, to 2,120.

On Monday the Commerce Department said personal incomes rose 0.2% compared with the projected 0.3%. Even though consumer spending increased slightly more than expected at 0.4% the gap between the figures raised concerns that the gain in spending may not be sustainable.

Adding to the negative sentiment, President Obama failed to provide an action plan for the economic recovery in an afternoon speech. The expectation that figures this week will confirm the economy shed jobs this month also kept investors at bay.

The financial sector suffered the most, with Citigroup declining nine cents, to $3.67, and Bank of America falling 32 cents, to $12.32.

Intel shed 2.2% after Infineon Technologies agreed to offload its wireless chip unit to the company for $1.4bn. Genzyme was up 3.4% after it turned down an $18.5bn offer from Sanofi-Aventis as “unrealistic”.

In Europe, shares closed flat as a rise in eurozone economic sentiment for August and an increase in merger and acquisitions activity failed to sustain the early day rally. The FTSE Eurofirst 300 fell 0.1% to 1,025 as financial stocks retreated across the region.

In Asia, investors cheered the fresh economic stimulus measures from the Bank of Japan in the form of an expansion of a special lending programme for lenders. However, enthusiasm flagged a little after the BoJ stopped short of taking aggressive action to stall the yen’s climb.

Markets were also upbeat by big gains on Wall Street on Friday after the US Federal Reserve chief Ben Bernanke’s speech.

The Nikkei closed 1.8% higher, with Australia’s S&P/ASX 200 advancing 1.9%. South Korea’s Kospi gained 1.8% and Hong Kong’s Hang Seng was 0.7% up. In Shanghai, the Composite index gained 1.6%, with commodity stocks leading the way.