NEW YORK – US stocks tumbled to their lowest close in nearly a month on Thursday as the latest batch of data amplified concerns the economy is stuck in neutral.
The selloff was broad, with five stocks falling for every one rising on the New York Stock Exchange. Sectors most sensitive to growth were hit hardest. Manufacturers 3M, United Technologies, and Boeing were the biggest drags on the Dow.
"I'm bearish on the economy, I'm bearish on the market at the moment," said Kenneth Polcari, NYSE floor trader and managing director at Icap Corporates. "The macro data for the last month-and-a-half has been nothing but negative."
The Dow Jones industrial average dropped 144.33 points, or 1.39%, to 10,271.21. The Standard & Poor's 500 Index fell 18.53 points, or 1.69%, to 1,075.63 for its lowest close since July 21. The Nasdaq Composite Index lost 36.75 points, or 1.66%, to 2,178.95.
A report showing factory activity in the mid-Atlantic states contracted in August for the first time since July 2009 blind-sided investors, who had been expecting activity to increase. Earlier, the Labor Department said first-time claims for jobless benefits rose to a nine-month high.
Polcari noted that volume was low and pointed to a lack of participation by institutional fund managers, who he said were on the sidelines due to uncertainty about the economy. Volume on the NYSE Arca, Nasdaq and American Stock Exchanges was 7.97 billion, compared to last year's daily average of 9.65 billion.
U.S. Treasuries prices rose as investors moved out of riskier assets into safe-haven government debt, with the yield on the two-year Treasury note falling to a record low.
In the currency markets investors flocked to safe havens, such as the US dollar, yen and Swiss franc. Gold rose for a sixth day.
"Even the most optimistic people have to concede the economy at the very least has paused," said Bill Strazullo, partner and chief investment strategist at Bell Curve Trading in Boston.
The S&P 500 index fell back well below its 50-day moving average, a worrying development for investors after the index appeared to move up into a range between that level and its 200-day moving average over the last few days. The index posted its lowest close since July 21.
Even a bout of substantial M&A activity, which typically boosts Wall Street's mood, failed to stem the losses.
Intel Corp offered to buy security software maker McAfee Inc for about $7.68 billion in cash. McAfee surged 57.1% to $47.01, while Intel dipped 3.5% to $18.90.
Energy and materials shares also lost ground as the price of oil fell while metal prices dipped as investors worried about demand after the weak US data.
Exxon Corp fell 1.4% to $59.29, while Freeport-McMoRan Copper & Gold Inc fell 1.5% to $72.09.
Williams-Sonoma Inc stuck with a forecast for the end of the year, including the holiday shopping season, that fell short of Wall Street's expectations. Its shares fell 2.2% to $27.72.
Sears Holdings Corp tumbled 9.2% to $61.03 after the department store chain reported a wider-than-expected quarterly loss.. The S&P index of consumer discretionary shares fell 1.8%.
Leading the Dow lower, 3M fell 2.1% to $81.81. United Technologies fell 2% to $68.51 and Boeing dropped 2% to $64.62.
Despite the declines, short term support held, with the S&P bouncing off the 1,070 level, which represented last week's low. If the index falls through that, the next potential support level is around 1,060.
On the New York Stock Exchange, decliners beat advancers by about 5 to 1. On Nasdaq, about 9 stocks fell for every 2 that rose.