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 at one
point falling more than 200 points, after data pointing to a China
slowdown battered commodities and cyclical stocks.
Adding to market participants' anxiety Monday afternoon were
reports of explosions at the finish line of the Boston
Marathon.
The Dow Jones Industrial Average(DJI) fell 147 points, or 1%, to
14,718 after having been down more than 200 points. The S&P 500
(SPX) sank 22 points, or 1.4%, to 1,567. The Nasdaq Composite
(RIXF) sank 51 points, or 1.6%, to 3,244.
The day's selloff, potentially the worst since Feb. 25, looked
likely to halt a rally that had seemed all but unstoppable. No
matter the worry, from the Cyprus bailout 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
selloffs 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.
Monday's retreat, which worsened as the day progressed, threw
some cold water on the rally's momentum. Scott Redler, a technical
strategist at T3 Trading, said he's been watching to see whether
stocks could hold on to recent gains after the S&P 500 hit an
intraday record of 1,597 last week. "What is important after a
breakout is measuring the validity of the break out. If it fails to
hold and turns into a bit of a trap, take notice," he wrote in
emailed comments.
U.S. equity losses were an extension of a selloff that took
place in Europe and Asia after China reported that its gross
domestic product for the January-through-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. It ended Monday's session with a
loss of more than $140, its worst one-day performance since the
early 1980s. Other metals, notably silver, and oil also
tumbled.
On the S&P 500, resource stocks including Newmont Mining
Corp. (NEM), Freeport McMoRan Copper & Gold Inc. (FCX) and
iron-ore maker Cliffs Natural Resources (CLF) led losses. Of the 10
sectors, all but telecom were lower, with the downward pace being
set 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).
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 residential-builders 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
reading of 7.8 and the lowest reading since January. PulteGroup
Inc. (PHM) fell 6%.
"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, CEO of RDM Financial.
Citi, Sprint and Life
The high-profile earnings report of the day, plus some deal
news, delivered a small measure of green to traders' screens.
Shares of Citigroup Inc. (C) rose 1.3% after the banking company
said first-quarter profit rose 30%. Helped by better
capital-markets revenue and declining losses in businesses it is
trying to shed, the company reported adjusted earnings of $1.29 a
share, topping forecasts of $1.17 a share.
Charles Schwab Corp. shares (SCHW) fell 2.7% 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 14%, 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 .
Shares of Life Technologies Corp. (LIFE) rose 7.7%, 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 June delivery closed down $140.30 an ounce,
or 9.3%, to $1,361.10 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 now likely to drop to $1,265.
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 (CLK3) ended down 2.8% at
$88.71 a barrel, its lowest settlement for a most-active contract
this year. Silver for May delivery (SIK3) skidded 11% to $23.36 an
ounce.
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