By Laura Mandaro, MarketWatch
SAN FRANCISCO (MarketWatch) -- U.S. stocks Monday were on track
for their worst day in seven weeks, with the Dow industrials off
more than 100 points, after data pointing to a China slowdown and
less optimism among home builders sapped momentum in what's been a
near-vertical stock rally.
The Dow Jones Industrial Average(DJI) fell 160 points, or 1.1%,
to 14,705. The S&P 500 (SPX) lost 21 points, or 1.3%, to 1,568.
The Nasdaq Composite (RIXF) sank 52 points, or 1.6%, to 3,243.
U.S. stocks extended losses in Europe and Asian equities after
China announced gross domestic product for the January-March
quarter grew 7.7% from a year earlier, less than forecasts calling
for growth of 8%, while industrial production in April slowed to
8.9%, the weakest in more than a year.
Gold was hit hard by that news, deepening Friday's losses with a
decline of more than 8% to fall below $1,400 an ounce. Other metals
and oil also tumbled.
On the S&P 500, resource stocks including Newmont Mining
Corp. (NEM)and Freeport McMoRan Copper & Gold Inc. (FCX) led
losses. Of the 10 sectors, all but telecoms were lower, led by
nearly 3% drops in the materials and energy sectors.
On the Dow, heavy equipment maker Caterpillar Inc. (CAT) fell
the most, followed by other blue chips considered heavily exposed
to China or global resource demand: oil-major Chevron Corp. (CVX) ,
Alcoa Corp. (AA), Exxon Mobil Corp. (XOM) and General Electric Co.
(GE)
The China data "set the negative tone off for stocks," said Nick
Raich, chief executive officer of The Earnings Scout.
"The slower-than-expected growth coming out of China is putting
on fears that maybe there's a little bit of a slowdown occurring. I
don't think we should be terribly surprised," he said, pointing to
underperforming emerging-market stocks and commodities as
indicators for a slowdown in global growth.
Declines deepened after a report showed the National Association
of Home Builders/Wells Fargo housing-market index dropped to 42 in
April from 44 in March, short of a forecast rise to 46. Ahead of
the bell, an Empire State manufacturing index fell to 3.1 points in
April from 9.2 in March, below forecasts calling for an index of
7.8 and the slowest reading since January.
The day's selloff, potentially the worse since Feb. 25, risks
pausing a rally that has seemed unstoppable. No matter the worry,
from the Cyprus bail-out that risked breaking up the euro zone, to
U.S. budget cutbacks, buyers have repeatedly shown an interest in
buying stocks on the dip. As a result, ugly sell-offs have often
turned into mild retreats by day's end, causing some strategists to
wonder if investors are getting too complacent--particularly given
last week's disappointing data on U.S. retail sales.
"This may not be a day where [the market] comes back, but
certainly there's more than enough cash to fill in. If there isn't,
and the consumer is taking a holiday, don't expect much out of the
whole quarter," said Ron Weiner, president and CEO of RDM
Financial.
Citi, Spring, Life
The most high-profile earnings report of the day, plus some deal
news, provided a glimmer of green on traders' screens.
Citigroup Inc. (C) shares rose 2.3% after the banking company
said first-quarter profit rose 30%. Helped by better capital
markets revenue and fewer losses in businesses it is trying to
drop, the company reported adjusted earnings were $1.29 a share,
topping forecasts of $1.17 a share.
Charles Schwab Corp. (SCHW) shares fell 2.4% after the retail
brokerage posted first-quarter net income of 15 cents on revenue of
$1.29 billion. Forecasts were calling for net income of 16 cents on
sales of $1.27 billion.
Shares of Sprint Nextel Corp. (US-S) jumped 13%, the S&P
500's top stock, after Dish Network Corp. (DISH) said it would
offer $25.5 billion for Sprint, in a bid to derail an acquisition
for the group by Softbank Corp. of Japan. .
Life Technologies Corp. (LIFE) rose 7.6%, the second best on the
S&P 500, after Thermo Fisher Scientific (TMO) said it would buy
the biotech researcher for about $13.6 billion.
After entering bear-market territory on Friday with a 20% drop
from its peak, gold for May delivery (GCK3) was down $125, or 8%,
at $1,375.90 an ounce, undermined by the China data, which added to
already negative sentiment.
"It's a slaughter," said Carsten Fritsch, senior commodity
analyst at Commerzbank AG.
Societe Generale said gold is likely to drop to $1,265 now.
It was among many asset classes being hit hard. In addition to
losses for Asia and European markets, led by mining stocks, oil for
May delivery was down 2.5%, to $88.99 a barrel. Silver for May
delivery (SIK3) skidded 11%, to $23.43 an ounce.
The Australian dollar was most impacted by weak China data,
while the U.S. dollar continued to back away from four-year highs
reached last week against the Japanese yen after the U.S. Treasury
Department on Friday warned Japan not to actively devalue its
currency.
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