Technology and consumer discretionary stocks tumbled on Monday as investors fretted about signs of weakness in the economy that are likely to put a halt to the stock market's run this summer.
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, in the latest report to point to the potential for a slowing economy.
The Nasdaq suffered the worst hit while other indexes drew support from strength in materials and financial stocks, which rebounded from Friday's sharp fall. Some rotation into defensive names in the healthcare and utilities sectors also cushioned the Dow and the S&P 500 from steeper losses.
We have had some data that has been softening so I guess we are going to experience a bit of a slowdown, said Frank Lesh, an analyst and broker at FuturePath Trading in Chicago.
We're getting past the positive influence of earnings and starting to look at what else is out there, and it doesn't seem to be a positive as the earnings were.
Big retail names such as Amazon.com
The Dow Jones industrial average <.DJI> shed 18.54 points, or 0.15 percent, to 12,577.21. The Standard & Poor's 500 Index <.SPX> slipped 4.35 points, or 0.33 percent, to 1,333.42. The Nasdaq Composite Index <.IXIC> dropped 34.13 points, or 1.21 percent, to 2,794.34.
An inverse correlation between the dollar and stocks has started to re-emerge as volatility in markets increases before the Federal Reserve is expected to end its stimulus program next month, helping commodity-linked stocks.
The S&P's materials sector <.GSPM> gained 0.1 percent and was the best-performing sector, helped by gains in Cliffs Natural Resources
Cliffs produces iron ore pellets and metallurgical coal.
Some defensive names helped the Dow industrials. Pharmaceutical stocks Pfizer
In deal news, shares of NYSE Euronext
Meeting on Monday, euro-zone finance ministers are likely to back a bailout package for Portugal, with new conditions set by Finland. During the 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 earnings news, shares of J.C. Penney Co Inc
reported a higher quarterly profit as the shares retraced some of their recent gains.
But Lowe's Cos
UBS increased its earnings view for S&P 500 companies for this year and next after stronger-than-expected earnings in the first quarter, but said it was maintaining its 1,425 target level for the S&P 500 as indicators signal a soft patch for stocks.
(Reporting by Edward Krudy, Editing by Jan Paschal)