MARKET SNAPSHOT: U.S. Stocks Tumble After Weak ISM Data

By Anora Mahmudova, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks extended losses on Monday after a weaker-than-expected reading on manufacturing data added to the downbeat mood, with investors already shaken by concerns over a slowdown in China.

U.S. manufacturers expanded in January at the slowest rate in eight months as the pace of new orders sharply decelerated, according to the closely followed ISM index. The Institute for Supply Management index sank to 51.3% from 56.5% in December. That's the lowest level since last May. Economists surveyed by MarketWatch had expected the index to drop to 56.0%. Read: How reliable are ISM reports?

The S&P 500 index (SPX) was down 15 points, or 0.8%, at 1,767.79, falling below the key level resistance level of 1,775. Market technicians watch this level closely, as closing below it would trigger heavy selling by algorithmic programs, which comprise about 40% of the market.

The Dow Jones Industrial Average (DJI) fell 121 points, or 0.8%, to 15,580.23. The Nasdaq Composite (RIXF) shed 37 points, or 1%, to 4,064.66. Follow our stock market live blog.

"The headline numbers from the ISM data were much weaker than expected and it would be interesting to see just how much of it is due to bad weather," said Quincy Krosby, market strategist at Prudential Financial.

"Investors will be watching the employment data on Friday very keenly, to see if there is a confirmation that we are somehow entering a soft patch. As the Fed continues with the tapering, the markets once again react to bad news negatively and are recalibrating valuations to economic data and earnings," Krosby said.

The main indexes ended January with the steepest losses in more than a year, as disappointing data from China, which triggered selloffs in emerging-markets currencies over the past two weeks, and worries over deflation in the euro zone forced investors to flee equity markets and seek safer assets.

The implied volatility as measured by the CBOE Vix index, which moves inversely to the S&P 500, jumped 8.8% to nearly 20, the level not seen since October.

Less-than-stellar earnings results from corporations did little to alleviate fears among investors.

Shares of Jos. A. Bank Clothiers Inc. (JOSB) fell 3.6% after The Wall Street Journal reported Sunday that the company is in talks to buy fellow apparel retailer Eddie Bauer, citing sources. Jos. A. Bank and Men's Wearhouse Inc. (MW) have been locked in a monthslong battle to buy each other out. Shares in Men's Wearhouse slid 6.3%.

Herbalife Ltd. (HLF) shares jumped after the company said it plans to offer $1 billion of convertible notes and use the proceeds to buy back shares. However, gains petered out and the stock was 0.4% higher.

Ford Motor Co. (F) shares fell 2% after the car maker reported a 7% drop in January sales. General Motors Co. (GM.XX) reported that its U.S. sales in January fell 12%, more than expected by analysts. The stock fell 1%.

In other markets, the Nikkei Stock Average fell 2%, putting it in a technical correction as it closed at 14,619.13, which is just 10% off from a Dec. 30 high of 16,291.

European stocks markets moved lower on Monday, mirroring a negative mood in Asia, after Chinese manufacturing data added to fears about a slowdown in the world's second-largest economy. The dollar (DXY) was mostly lower, and oil was flat, while gold (GCH4) rose.