Stocks Join In Global Sell-Off Amid Economic Worries - U.S. Commentary

(RTTNews) - Stocks saw substantial weakness during trading on Monday, joining in the sell-off seen in markets around the world. With the steep drop on the day, the tech-heavy Nasdaq fell to its lowest closing level in well over two months.

The major averages regained some ground going into the close but still ended the day firmly in the red. The Dow slumped 276.09 points or 1.6 percent to 17,148.94, the Nasdaq plummeted 104.32 points or 2.1 percent to 4,903.09 and the S&P 500 tumbled 31.28 points or 1.5 percent to 2,012.66.

The weakness on Wall Street came as stocks around the world fell sharply amid renewed concerns about the global economy.

Chinese stocks showed a substantial drop on the day, dragging the Shanghai Composite Index down by 6.9 percent and triggering a trading halt.

Disappointing manufacturing data contributed to the weakness among Chinese stocks, as a report from Markit and Caixin showed that their index of Chinese manufacturing activity continued to indicate a contraction in December.

Negative sentiment was also generated by the release of disappointing U.S. data, including a report from the Institute for Supply Management showing a continued contraction in manufacturing activity.

The ISM said its purchasing managers index edged down to 48.2 in December from 48.6 in November, with a reading below 50 indicating a contraction.

The modest drop came as a surprise to economists, as the consensus estimate called for the index to inch up to a reading of 49.2.

With the unexpected decrease, the manufacturing index dropped to its lowest level since hitting 45.8 in June of 2009.

A separate report from the Commerce Department showed an unexpected decrease in construction spending in the month of November.

Geopolitical concerns also weighed on the markets after Saudi Arabia cut diplomatic ties with Iran amid a dispute over the execution of a Shiite cleric.

Sector News

Most of the major sectors came under considerable pressure on the day, reflecting broad based weakness on Wall Street.

Airline stocks turned in some of the market's worst performances, resulting in a 3.8 percent drop by the NYSE Arca Airline Index. With the loss, the index fell to its lowest closing level in four months.

Within the airline sector, China Southern Airlines (ZNH) and Republic Airways (RJET) posted particularly steep losses.

Substantial weakness was also visible among internet stocks, as reflected by the 3 percent loss posted by the Dow Jones Internet Index. Netflix (NFLX) helped lead the sector lower after Baird downgraded the stock to Neutral from Outperform.

Financial, biotechnology, housing, and healthcare stocks also saw significant weakness on the day, while gold and energy stocks were among the few groups to buck the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw substantial weakness during trading on Monday. Japan's Nikkei 225 Index plunged by 3.1 percent, while Hong Kong's Hang Seng Index tumbled by 2.7 percent.

The major European markets also moved sharply lower on the day. While the German DAX Index plummeted by 4.3 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index slumped by 2.5 percent and 2.4 percent, respectively.

In the bond market, treasuries moved notably higher amid the sell-off on Wall Street. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 2.4 basis points to 2.245 percent.

Looking Ahead

Amid a quiet day on the U.S. economic front, trading activity on Tuesday may be somewhat subdued as traders look ahead to key reports due later in the week.