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.
The Dow Jones industrial average skidded 186 points and the major indexes fell at least 2 percent. The Nasdaq composite index was hardest hit, falling 2.8 percent, but it also had the biggest advance as Wall Street rallied this year.
A shudder in China's main stock market touched off a wave of selling that spread to Europe and then the U.S. A drop in quarterly profits at home improvement retailer Lowe's Cos. added to worries that an improvement in the economy is far off.
Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said the selling was warranted.
"The economics obviously don't support where we've been," he said.
The slide on Wall Street was steep but felt more controlled than the plunges of the past year because stocks ended just off of their worst levels and because analysts have been calling for a retreat after the Dow and Standard & Poor's 500 index raced up 15 percent in only five weeks.
The Shanghai stock market tumbled 5.8 percent Monday as investors worried that stocks had risen too quickly and that the Chinese government would tighten bank lending policies.Optimism backlash
Worries grew as Lowe's said consumers are putting off big purchases. Consumer spending accounts for more than two-thirds of U.S. economic activity.
Some investors used to seeing a quick bounce-back in stocks have underestimated how difficult the recovery could be, even though many analysts have warned that it could take well into 2010 for the economy to regain strength.
Now, with consumers facing high unemployment, weak home prices and mounds of debt, investors are worrying that they had grown too optimistic even though the stock market tends to improve before the economy after a recession.
The Dow fell 186.06, or 2 percent, to 9,135.34, its lowest close since July 29.
The S&P 500 index fell 24.36, or 2.4 percent, to 979.73. Last week it was up 49.7 percent from a 12-year low of 676 in early March.
Wall St. seeks to extend rallyCalifornia Enjoying Summer Sales Sizzle