A big drop in Asian markets sent U.S. stocks falling as investors worried once again about the global economy.
Major U.S. indexes lost about 1 percent Monday after China’s main index plunged 6.7 percent, adding to a nearly 3 percent drop on Friday. The selloff in Chinese shares has been fed by concerns over a tightening in bank lending that could hurt the country’s economy. That in turn has weighed on markets around the globe this month.
Japan’s Nikkei stock average fell 0.4 percent after the country’s opposition party came to power in a landslide victory. European markets were also lower.
There was little U.S. economic news expected Monday, but key readings come later this week on manufacturing and employment in August that have the ability to either sustain or upset the market’s massive six-month rally.
After rising more than 45 percent from 12-year lows in March, the Dow Jones industrial average stands about 500 points away from 10,000. Investors have grown increasingly worried that the market may have gotten too far ahead of the economy. Without evidence of actual economic growth, analysts have warned that the market’s rally could fizzle in the coming weeks, especially as traders head into September, historically a rough month for the stock market.
“There’s enough jitteriness to set the stage for a decline,” said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. “The economic numbers could neutralize the nervousness, could put portfolio managers’ worries to rest.”
Two big deals between The Walt Disney Co. and Marvel Entertainment Inc. and oilfield services companies Baker Hughes Inc. and BJ Services Co. did little to support the market.
In early trading, the Dow Jones industrial average fell 82.83, or 0.9 percent, to 9,461.37. The Standard & Poor’s 500 index fell 11.71, or 1.1 percent, to 1,017.22, while the Nasdaq composite index fell 26.81, or 1.3 percent, to 2,001.96.
About eight stocks fell for every one that rose on the New York Stock Exchange, where volume came to 207.2 million shares, compared with 215.6 million at the same time on Friday.
In other trading, the Russell 2000 index of smaller companies fell 9.58, or 1.7 percent, to 570.28.
Germany’s DAX index and France’s CAC-40 were down 0.8 percent in afternoon trading. The London Stock Exchange was closed for a public holiday.
Bond prices mostly rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.44 percent from 3.45 percent late Friday.
Two big acquisitions totaling close to $10 billion did little to excite investors Monday. Dealmaking — and companies’ willingness to part with cash or take on debt — is typically seen as a sign of confidence in the economy.
Walt Disney said it plans to buy Marvel Entertainment for $4 billion in cash and stock.
Disney shares slid 45 cents to $26.39, while Marvel shares jumped more than 26 percent, or $10.20, to $48.85.
Earlier Monday, Baker Hughes said it will buy BJ Services in a cash-and-stock deal valued at $5.5 billion.
BJ Services shares shot up more than 7 percent, adding $1.10 to $16.53. Baker Hughes shares fell $2.94, or 7.7 percent, to $35.15.
Despite Monday’s pullback, stocks are on track to have their best August since 2000. Most of the gains were made earlier this month as investors cheered improvements in consumer confidence and an upbeat assessment of the economy from Federal Reserve Chairman Ben Bernanke.
Last week, the major indexes all rose less than 0.5 percent amid light trading and little news.
Trading is expected to be relatively light this week as well, with many traders taking vacations. Light volume can skew the market’s movements. Still, there are a number of important readings on the economy that could sway the market one way or the other.
On Tuesday, the Institute for Supply Management will issue its assessment of the manufacturing industry during August. Economists are expecting ISM’s manufacturing index to come in at 50.1, up from 48.9 in July. A reading above 50 would indicate growth in manufacturing, something that hasn’t happened since January 2008.
The most important piece of data this week is the government’s monthly jobs report on Friday. Economists are expecting another 220,000 jobs were lost, down from 247,000 in July. Last month’s report showed an unexpected dip in the unemployment rate and investors are anxious to see if the rate continues to fall.
As unemployment spiked this year, Americans who lost their jobs or were worried about their job security dramatically cut back on their spending. If fewer jobs are being lost, consumers might start to feel comfortable spending again and help get the economy back on its feet.
August sales reports from major retailers this week will provide the latest insight into consumer spending.
The dollar was higher against other major currencies, while gold prices fell.
Oil prices lost dropped $2.34 to $70.40 a barrel on the New York Mercantile Exchange.
Copyright 2009 The Associated Press.