Wall Street fell sharply in early trading on Tuesday, joining a global stock decline on growing concerns about slowing economies in the United States and China. Worries that US stocks are about to embark on a major correction fed the drop, which took the Dow Jones industrials down more than 120 points.
A 9% slide in Chinese stocks earlier set the tone for US trading. Concerns that China’s economy will slow sent many investors selling just a day after they sent Shanghai’s benchmark index to a record high close.
A warning from former Federal Reserve chairperson Alan Greenspan on Monday that the US economy may be headed for a recession also took a toll.
A Commerce Department report that orders for durable goods in January dropped by the largest amount in three months exacerbated concerns about the economy, as did a Standard & Poor’s index showing single-family home prices across the nation were flat in December.
A suicide bomber attack on the main US military base in Afghanistan where Vice-President Dick Cheney was visiting also rattled the market.
In the first hour of trading, the Dow Jones industrial average dropped 122,57, or 0,97%, to 12 509,69.
Broader stock indicators also fell sharply. The Standard & Poor’s 500 index was down 16,87, or 1,16%, to 1 431,41, and the Nasdaq composite index was down 46,07, or 1,84%, to 2 458,45.
China’s stock market plummeted on Tuesday from record highs as investors took profits when concerns arose that the Chinese government may try to cool its ballooning economy by raising interest rates again or reducing more of the money available for lending.
The Shanghai Composite Index tumbled 8,8% to close at 2 771,79, its biggest decline since it fell by 8,9% on February 18 1997. Japan’s Nikkei stock average fell a more moderate 0,52%.
But European markets were clearly rattled — in afternoon trading, Britain’s FTSE 100 was down 2,28%, Germany’s DAX index was down 2,44% and France’s CAC-40 was down 2,87%.
Bond prices rose as investors bought into the safe-haven Treasury market, with the yield on the benchmark 10-year Treasury note dropping to 4,6% from 4,63% late on Monday.
Oil prices dropped $1,03 to $60,36 a barrel on the New York Mercantile Exchange on worries that Chinese demand could be dampened should its economy cool off.
The Dow has been climbing at an extremely steady rate since last summer, but over the past few trading sessions, stocks have pulled back on the worry that the market is due for a correction. Many analysts noted that the Dow had not seen a 2% decline in 121 sessions. — Sapa-AP