Selling Spree: Dow Loses 186 on Economic Fears

Worries about the strength of a possible economic recovery resurfaced on Wall Street on Monday, shoving the Dow 186 points lower and to its worst day since early July. Investors are finding out what everybody else already knew: The consumer isn't going to spend the economy into recovery.

Major U.S. stocks indexes tumbled by the biggest amount in six weeks Monday as investors grew worried that they have been too quick to bet on an economic rebound during the market's five-month rally. Overseas markets plunged and investors' demand for safe-haven investments sent the dollar and Treasury prices shooting higher.

Today’s Markets
The Dow Jones Industrial Average fell 186.06 points, or 2%, to 9135.34, the Standard & Poor's 500 dropped 24.36 points, or 2.43%, to 979.73 and the Nasdaq Composite slid 54.68 points, or 2.75%, to 1930.84.

Concerns about the economy were reignited Monday by a global equities selloff, disappointing guidance from home improvement retailer Lowe’s(LOW: 20.48, -2.35, -10.29%) and the largest bank failure of the year. The gloomy sentiment pushed the S&P 500 below the pivotal 1000 threshold, sent crude oil to two-week lows and China’s Shanghai Composite to its worst daily plunge since November.

The wave of selling comes after the markets closed slightly lower last week, their first weekly decline since the second week of July. So far, the losses have put just a small dent in Wall Street’s summer surge, which was fueled by hopes of an economic recovery and pushed the Dow up 15% in just a month.

The Dow on Monday suffered its worst one-day slide since falling 223 points on July 2. Combined with Friday's modest selloff, the benchmark index is now down 263 points, or 2.8%, over the past two days, its weakest stretch since June 16. Even with the losses, the Dow is up 40% from its 12-year closing low in March.

The vast majority of the Dow's 30 components lost ground, led by aluminum titan Alcoa, Bank of America and Caterpillar. Defensive stocks like Pfizer and Coca-Cola edged higher. The Nasdaq Composite tumbled further than the broader markets, suffering its worst day since June 22, as tech giants like Amazon.com and eBay fell sharply.

While the bears cheered the setback on Wall Street, the bulls said lots of cash is waiting on the sidelines to enter the markets at the first chance.

“Retracement is always healthy in the longer-term view,” said NYSE trader Jason Weisberg of Seaport Securities. “I still think if your long-term macro view is that we’re going higher, this is a buying opportunity.”

The selling on Monday began overseas, with Asia taking the brunt of the damage despite Japan’s first positive quarter of GDP in a year. The Shanghai Composite plunged 5.8% to two-month lows and Japan’s Nikkei 225 tumbled 3.1% as the GDP report missed expectations and traders worried about whether the growth was sustainable or just the result of stimulus spending. European markets also tumbled, closing in the red for the second straight day.

Markets outside the United States also plunged Monday despite news that Japan has emerged from recession. China, Tokyo and Hong Kong bore the brunt of losses in Asia as investors mulled last Friday's US consumer confidence survey.

"A sharp sell-off in overseas markets provided a reason to drop stocks below their recent trading ranges," analysts at Briefing.com said in a client note.

They noted the absence of buying even as prices fell.
"One interesting point, though, was that the stock market's pullback didn't bring out any buyers looking to buy the dip as has been the case in recent weeks," the analysts said. "The absence of that support left the stock market to fall to its lowest level since July."

The main US stock indexes had pulled back Friday from a four-week run that saw gains of some 15 percent for the broad market.