US stocks Monday fell more than two percent after a surprisingly weak US manufacturing report sparked another round of selling amid concerns about the strength of the global economy.
The Dow Jones Industrial Average tumbled 326.05 points (2.08 percent) to 15,372.80.
The broad-based S&P 500 fell 40.70 (2.28 percent) to 1,741.89 and the tech-rich Nasdaq Composite Index slumped 106.92 (2.61 percent) to 3,996.96.
“This is the beginning of the correction that we have been waiting for,” said Peter Cardillo, chief market economist at Rockwell Global Capital.
The sell-off came after a report showing US manufacturing sector growth slowed sharply in January. The Institute for Supply Management’s purchasing managers index sank to 51.3 from 56.5 in December, not far above the 50 level between expansion and contraction.
Cardillo said economic data “are certainly not good,” but noted that some of the weakness could be attributed to extremely cold weather that depressed consumption and other activity.
Scott Wren, senior equity strategist, said a stocks correction was inevitable after investors excessively bid up equities in late 2013 on improving economic data.
“We’re in a modest-growth, modest-inflation environment,” Wren said. “People got carried away with a perceived acceleration of the economy.”
Wren predicted the S&P 500 could fall as low as 1,700, but recommended that clients use the retreat as a buying opportunity.
General Motors fell 2.3 percent after January US vehicle sales slumped 12 percent, while Ford declined 2.7 percent after its January sales dropped seven percent.
January is typically the toughest month for auto sales as showrooms empty out following big year-end sales in December. But unusually brutal winter weather this year kept people at home and even delayed delivery of sales to government and corporate fleets.
Telecommunications stocks sank after a price cut by AT&T on family plans for smartphones raised worries about toughening competition. AT&T fell 4.1 percent, Verizon lost 3.4 percent and Sprint gave up 5.1 percent. Both AT&T and Verizon are in the Dow.
Pfizer was the only member of the Dow to rise, gaining 0.7 percent after announcing positive clinical data on its palbociclib medication for post-menopausal women with advanced or newly diagnosed metastatic breast cancer.
Bond prices jumped. The yield on the 10-year US Treasury fell to 2.58 percent from 2.67 percent Friday, while the 30-year dropped to 3.54 percent from 3.62 percent. Bond prices and yields move inversely.
[Image via Agence France-Presse]