U.S. stocks sold off broadly on Monday as regional manufacturing data sparked fresh concerns about the economy's health, while sliding commodity prices hit shares of natural resource companies.
Data showing manufacturing in New York state shrank in June at a much more severe rate than forecast gave investors pause. Even though there has been some signs that the economy may be stabilizing, investors are looking for more definitive signals that the recession is moderating.
With the market now having risen more than 40 percent since the 12-year lows of early March, analysts said conditions warranted some consolidation. Last Friday, the Dow closed out a four-week winning streak and turned positive for the year for the first time.
Also dampening sentiment, Goldman Sachs cut its rating on Wal-Mart Stores Inc
Wal-Mart, a Dow component, fell 2.8 percent to $48.43, and was among the top drags on the blue-chip Dow. The S&P's retail index <.RLX> fell 2 percent.
The Empire State (manufacturing) index was not received very well, said Bruce Zaro, chief technical strategist at Delta Global Advisors in Boston. The market has been looking for a report like this to suggest that everything is overdone and that we need a sell-off.
The Dow Jones industrial average <.DJI> dropped 185.92 points, or 2.11 percent, to 8,613.34. The Standard & Poor's 500 Index <.SPX> fell 22.84 points, or 2.41 percent, to 923.37. The Nasdaq Composite Index <.IXIC> lost 48.21 points, or 2.59 percent, to 1,810.59.
Technology shares, which were among the market's biggest gainers in a rally from the 12-year closing lows of early March, also fell heavily, with the PHLX semiconductor index <.SOXX> fell 2.4 percent. Shares of tech bellwethers, such as Qualcomm Inc
The pullback in commodity prices coincided with a rebound in the U.S. dollar following Russian comments expressing confidence in the U.S. currency.
The stronger dollar helped spur a 3 percent drop in the price of oil, which fell below $70 per barrel after spiking above $73 last week. The decline hit energy companies' shares such as Exxon Mobil Corp
While the recent run-up in commodity prices helped stocks extend their recent rebound from March lows, there has also been concern that a continued surge in oil and other commodities would stoke inflation pressures and hamper an economic recovery. Higher energy costs are a drag on consumer spending and corporate profits.
(Editing by Jan Paschal)