Wall Street fell for a third straight day on Thursday after continued contraction in manufacturing in both the euro zone and China fueled worries about the global economy.
The market has shown resilience recently, able to rebound off sluggish starts to the session, but Thursday's trading could represent the first significant test for the S&P 500 to hold the 1,400 support level.
China's manufacturing sector activity shrank in March for a fifth successive month, and in Europe, manufacturing in the euro zone contracted further, led by a decline in French and German factory activity, data showed.
Shares of FedEx Corp, the world's No. 2 package delivery company, slumped more than 4 percent and helped drag down the Dow Jones Transportation average after the company warned of a lowered outlook due to Europe's weak economy.
The stock market has been residing in this fantasy land, ignoring the bad data and only looking at the good ones, but it is now clear that Europe is entering a recession with Germany probably joining, and China could have a hard landing, said James Dailey, portfolio manager at TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.
We are not going to have a collapse like the '08, but there is a good chance that we have experienced the new highs and the market is starting to roll over to what may be the start of a bear market, Dailey said.
Thursday's data greatly reduced hopes the euro zone could sidestep a recession, and indicated China's slowdown has yet to wane.
The Dow Jones industrial average <.DJI> was down 90.36 points, or 0.69 percent, at 13,034.26. The Standard & Poor's 500 Index <.SPX> was down 12.11 points, or 0.86 percent, at 1,390.78. The Nasdaq Composite Index <.IXIC> was down 19.65 points, or 0.64 percent, at 3,055.67.
European equity markets weakened for a fourth straight session, heading for their longest down run in four months.<.EU>
Evidence of an improving U.S. jobs market failed to lift sentiment. The U.S. Labor Department reported new claims for unemployment benefits fell last week to 348,000, the lowest level in four years.
Dollar General Corp
(Editing by Leslie Adler)