Stocks tumbled as steep declines in gold and other
commodity prices fueled a selloff after worse-than-expected data on
Chinese and U.S. economic growth.
The plunge on Monday began during Asian hours and spread around the
globe. Late in the day, news of explosions at the site of the Boston
Marathon added to market jitters.
Stocks continued to slide on the back of
worries about economic growth in China and a steep tumble in commodity
prices. John Shipman reports.
But for most of the day, attention was
centered on the dive in gold prices. For the second straight session,
gold plummeted, losing $140.40, or 9.4%, to settle at $1360.60 a troy
ounce. The drop was the largest one-day percentage fall since February
1983. Monday's decline brought the two-day losses to $203.70, or 13%.
Traders reported talk of investors selling stocks to raise cash in response to losses on gold positions.
Citigroup's 30% jump in earnings will put the stock in focus on Wall Street. Chris Dieterich explains. Photo: Getty Images.
Chris Dieterich looks at China's Q1 GDP figures, plus Dish's unsolicited bid for Sprint. Photo: Getty Images.
The Dow Jones Industrial Average sank 265.86
points, or 1.8%, to 14599.20. The Standard & Poor's 500-stock index
slipped 36.49 points, or 2.3%, to 1552.36, and the Nasdaq Composite
Index fell 78.46 points, or 2.4%, to 3216.49. Total stock-trading volume
across all major U.S. exchanges was its highest this year, with 8.36
billion shares changing hands, the most since Dec. 21.
As investors exited riskier investments, small-company stocks were
particularly hard hit. The Russell 2000 index shed 3.8%, to 907.21, its
worst point and percentage decline since November 2011.
For weeks, stocks have defied expectations for a pullback and on many
days, an early selloff was pared by the end of trading. But Monday's
retreat saw the Dow industrials sink into the close and mark their worst
one-day point and percentage decline since Nov. 7.
Declines in commodity-linked sectors far outpaced losses in other
categories on Monday. Shares in the materials and energy sectors both
declined 3.9%. Mining company
Freeport-McMoRan Copper & Gold
FCX -8.30%
was the biggest decliner in the S&P 500, shedding $2.65, or 8.3%, to $29.27.
"When you talk about the sectors that
are leading on the way down, they're all commodity-backed in some
fashion," said Will Bertsch, head of U.S. equity trading for BMO Capital
Markets. At the same time, Monday saw a sharp rise in
exchange-traded-fund trading volume. "We think that speaks to investors
putting on hedges," by selling ETFs, Mr. Bertsch said.
Among ETFs Monday, there was record trading volume in the
SPDR Gold Trust,
GLD -8.78%
which tracks the price of physical gold. More than 93 million shares
of the ETF changed hands, shattering the previous record of 79 million.
Despite
the turmoil, traders said stock trading was smooth. "Ironically, it's
not as busy as you would expect when you see moves like this," said Mr.
Bertsch.
Getty Images
The selloff began in Asia and
spread around the globe, sparked by disappointing Chinese data. Above,
traders at the Big Board on Monday.
Helping kick off the selling was data
showing China's economy expanded 7.7% in the first quarter. That fell
short of expectations of 8%. Data on Chinese industrial production for
March also missed forecasts. The Shanghai Composite Index declined 1.1%
to its lowest level this year, while Hong Kong's Hang Seng Index fell
1.4%. Japan's Nikkei Stock Average pulled back 1.6%.
"Commodities can't appreciate without China being strong," said
Jeffrey Sica, chief investment officer and founder of SICA Wealth
Management, which invests in gold. He said he was sitting on his
positions but "wouldn't want to be among the first to try to call a
bottom here."
He said the corresponding selloff in stocks could be a sign that
large investment funds are selling stockholdings to cover losses.
"What's important to realize is how much gold is used as collateral," he
said.
"I think a lot of hedge funds were long gold, and holding out for a
move up with all the money-printing that's going on" by global central
banks, said Viren Chandrasoma, U.S. head of program trading at
Credit Suisse Group
CSGN.VX +0.61%
AG. "That has not come to pass…as soon as it started to look shaky,
people were heading to the exits." Investors tend to buy the metal as a
hedge against the inflation that may follow the increased liquidity in
the financial system from monetary easing.
In Europe, the Stoxx Europe 600 index fell 0.7%, while the U.K.'s FTSE 100 ended down 0.6%.
Silver prices dropped 11%, to $23.3550 an ounce. Crude oil also
declined, with prices slumping 2.8%, to $88.71 a barrel. The dollar rose
against the euro and fell against the yen. Meanwhile, demand rose for
the haven 10-year Treasury note, pushing the yield down to 1.702%.
Also weighing on stocks were two reports on the U.S. economy that came in worse than expected.
The Federal Reserve Bank of New York reported that manufacturing
barely expanded in the New York region this month, as the
business-conditions index declined more than expected. Separately, home
builders' confidence fell for the third straight month, on expectations
of a rise.
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