By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) -- The U.S. stock market closed with
sharp losses on Monday, after a much weaker-than-expected reading
on manufacturing data as well as concerns over a slowdown in China,
triggered the worst selloff in several months.
The S&P 500 and the Dow Jones Industrial Average ended the
day with the steepest decline since June 20.
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%. Read: How
reliable are ISM reports?
The S&P 500 index (SPX) closed down 40.70 points, or 2.3%,
at 1,741.89, 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) dropped 326.05 points, or
2.1%, to 15,372.80, falling below its 200-day moving average. The
drop is the seventh triple-digit decline this year.
The Nasdaq Composite (RIXF) ended the day 106.92 points, or
2.6%, lower at 3,996.96, its worst one-day drop since June 1, 2012.
The Russell 2000 (RUT) index of small-cap stocks finished the day
3.1% lower at 1,095.51 and is down 7.3% from its peak. Read the
recap of 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 14.6% to 21.09, a level
not seen since Dec. 28 2012, when the markets confronted the fiscal
cliff.
The 10-year Treasurys rallied, pushing yields to a fresh
three-month low. Yields fell 7 basis points to 2.58%.
Less-than-stellar earnings results did little to alleviate fears
among investors.
In other corporate news, shares of Jos. A. Bank Clothiers Inc.
(JOSB) fell 5% 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 7.8%.
Herbalife Ltd. (HLF) saw a volatile trade after the company said
it plans to offer $1 billion of convertible notes and use the
proceeds to buy back shares. Shares closed 7.2% higher.
Ford Motor Co. (F) shares fell 2.7% 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 2.3%.
Pfizer Inc (PFE) shares pared earlier losses to gain 0.7%. The
pharmaceutical giant said a trial for its advanced breast cancer
treatment met its primary goal.
In other markets, the Nikkei Stock Average fell 2.4%, 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.
More stories from MarketWatch:
6 easy ways to lose money in stocks
Treasurys rally on weak manufacturing data
'Stormy' January jobs report tough to figure
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