By Laura Mandaro and Ben Eisen, MarketWatch
SAN FRANCISCO (MarketWatch) -- U.S. stock indexes fell the most
in five months Monday, swept up in a rush out of gold, oil and
other commodities, after reports from China showed the industrial
giant's growth had cooled.
Soured sentiment built as the session wore on, exacerbated by a
drop in a gauge of U.S. home builders' confidence. Some strategists
said the pullback was expected after stock indexes notched records
last week.
"The market is down because it's extended. It has been going up
in the face of bad macro news," said Brian Belski, chief investment
strategist at BMO Capital Markets. China was "a reality check," he
said.
The Dow Jones Industrial Average(DJI) ended near its lows of the
day, down 265.86 points, or 1.8%, to 14,599.20. The S&P 500
index (SPX) sank 36.49 points, or 2.3%, to 1,552.36. The Nasdaq
Composite (RIXF) fell 78.46 points, or 2.4%, to 3,216.49.
As stocks fell, more investors piled in. Volume in New York
Stock Exchange-listed stocks was 4.6 billion, the largest day in a
month, and topping the year-to-date average of 3.5 billion. Total
market volume was the largest this year, according to the Wall
Street Journal's data group.
Adding to market participants' anxiety Monday afternoon were
reports of explosions at the finish line of the Boston
Marathon.
"It just throws another issue at Wall Street, creates an
enormous amount of uncertainty," Hugh Johnson, chairman of Hugh
Johnson Advisors, told MarketWatch Radio.
The day's selloff was the worst since Nov. 7, the day after the
U.S. presidential election, when investors turned their fears to an
impeding "fiscal cliff" of tax hikes and budget cuts.
The Monday rout was an abrupt pause in a rally that has seemed
all but unstoppable. From the Cyprus bailout that risked breaking
up the euro zone, to U.S. budget cutbacks, investors have
repeatedly shown an interest in buying stocks on the dip. As a
result, deep 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.
Scott Redler, chief strategist for T3Live.com, 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
breakout. If it fails to hold and turns into a bit of a trap, take
notice," he wrote in emailed comments.
See: Citi sees S&P 500 overshooting to 1,675.
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, raw-materials stocks including Newmont
Mining Corp. (NEM), Freeport McMoRan Copper & Gold Inc. (FCX)
and iron-ore maker Cliffs Natural Resources (CLF) paced losses. Of
the 10 S&P 500 sectors, all were lower, with the downward pace
being set by nearly 4% drops in the energy and materials
sector.
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),
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.
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 of 7.8. PulteGroup Inc.
(PHM) fell 7.1%.
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 0.2%, the only S&P 500
financial stock to end higher, 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 3.8% 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 7.5%, 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.
Société Générale 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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