The Nasdaq sank, leading U.S. stocks lower on Monday, as investors sold recent winners in a sign of growing unease with pockets of U.S. economic weakness.
Worries about the market's ability to extend its recent gains have increased. The expected end to the Federal Reserve's stimulus program next month and the recent collapse in commodity prices have made investors prone to sell more volatile stocks that have outperformed in 2011.
Tech leader Amazon.com lost 5 percent to $192.51, along with high-beta names including Priceline.com , down 3.3 percent at $503.38, and Netflix , down 3.8 percent at $237.09. Priceline is up 26 percent since the start of the year, while Netflix is up 35 percent.
Jeffrey Saut, Raymond James Financial chief investment strategist, in St. Petersburg, Florida, said as the Fed's $600 billion Treasury-buying program comes to a close, there is a chance of the first decent correction (since the rally started) because people will worry ... if the economy is going to gain enough traction to thrive on its own.
Data showing economic weakness added to the fears. On Monday, a gauge of manufacturing in New York State slid much more than expected in May to its lowest level in five months, the New York Federal Reserve said.
Tech and consumer-related shares were the biggest drags on the S&P 500, and their losses outweighed gains in defensive sectors such as health care and utilities.
The S&P is up about 27 percent since the start of September.
Stocks still could see gains in the near term, however, because investors chasing performance may keep buying.
You have the...potential for an intermediate top between now and the end of the quarter, Saut said.
The Dow Jones industrial average <.DJI> declined 47.38 points, or 0.38 percent, to close at 12,548.37. The Standard & Poor's 500 Index <.SPX> dropped 8.30 points, or 0.62 percent, to end at 1,329.47. The Nasdaq Composite Index <.IXIC> slid 46.16 points, or 1.63 percent, to 2,782.31.
Recent price action portends further market weakness, some analysts say. The S&P 500 ended a tad below key near-term support of 1,330, closing at its lowest since April 19.
Last week, we had the SOX (semiconductor index) falling, and this week, the Nasdaq 100 <.NDX> is leading the way down, said John Kosar, director of research at Asbury Research in Chicago. It's weak price activity, and not the kind of activity associated with a normal, healthy bull market that's about to go higher.
Among some of the most discouraging corporate results, Lowe's Cos reported weaker-than-expected quarterly earnings and cut its forecast for the year, sending shares down 3.6 percent to $24.84.
Financials helped stem the Dow's losses, including American Express , whose shares gained 1.2 percent to $50.07.
In the euro zone, finance ministers are likely to back a bailout package for Portugal, with new conditions set by Finland. During a meeting, euro-zone officials were expected to pressure Greece to announce more austerity steps to secure further emergency funding.
International Monetary Fund Managing Director Dominique Strauss-Kahn entered a New York court for arraignment after a weekend arrest on charges of attempted rape of a hotel maid. The case sent shock waves through French political circles and left the IMF in turmoil.
In other earnings news, shares of J.C. Penney Co Inc fell 3.2 percent to $37.21 after the department store operator reported a higher quarterly profit as the shares retraced some of their recent gains.
About 6.85 billion shares were traded on the New York Stock Exchange, NYSE Amex and Nasdaq, compared with the average of 7.73 billion so far in 2011.
Declining stocks outnumbered advancing ones on the NYSE by about 2 to 1, and on the Nasdaq, by a ratio of about 4 to 1.
(Reporting by Caroline Valetkevitch; Editing by Jan Paschal)