US stocks fall on worries about China
UNITED STATES (US) stocks followed world markets lower Tuesday after worrisome economic data out of China, whose blistering economy helped sustain global growth during the economic downturn.
Asian stocks fell sharply after a report that home prices dropped in 45 Chinese cities last month, a result of government policies designed to reduce property speculation. Mining giant BHP Billiton said it expects weakening Chinese demand for iron ore used in steelmaking.
On Wall Street, the Dow Jones industrial average and the Standard & Poor's 500 were both headed for their biggest losses in two weeks.
"If there were sceptics out there that the market might have gotten a little ahead of itself, this was all the news they needed," said Brian Gendreau, market strategist at Cetera Financial Group, a brokerage.
Gendreau said traders are increasingly concerned about slower growth in emerging markets - not just China, but India and Brazil as well.
The Dow was down 73 points at 13,167 just before 1 p.m. EDT. The S&P 500 was down seven at 1,402. The Nasdaq composite index dropped 21 points to 3,058.
Caterpillar, the maker of heavy equipment, led the Dow lower, sliding 2.9 per cent after it said global sales are growing more slowly. Bank of America, by far the most heavily traded stock, led the Dow higher with a 1.7 per cent gain.
Mining companies, which have increasingly relied on rising demand from the developing world, plunged after BHP Billiton's grim report on Chinese demand. Cliffs Natural Resources Inc. dropped three per cent, Peabody Energy Corp five per cent and US Steel two per cent.
US Treasury debt declined after a rally-busting overnight gain. Stronger demand had pushed the yield on the 10-year Treasury note down as low as 2.33 per cent after nine straight sessions of rising yields. By midday, the 10-year yield had recovered to 2.36 per cent, unchanged from late Monday.
The dollar rose against the euro. Traders tend to buy what they consider safer currencies, such as the dollar, when they are worried about the global economy. The euro fell to US$1.3218 in midday trading Tuesday from US$1.3238 late Monday.
Earlier Tuesday, the US Commerce Department released a mixed report on the housing market. Builders broke ground on fewer homes in February, though they obtained more permits to build homes later in the year.
Gendreau said the report's impact on trading was mild because most housing data in recent months have signalled a revival for the sector.
The price of oil fell two per cent after Saudi Arabia said it is ready to meet any shortfalls - real or perceived - in global supplies. New York crude was down US$2.14 at US$106.41.