US stocks sink on fears about China and growth
(Reuters)Updated: 2007-02-28 08:45
NEW YORK - U.S. stocks tumbled on Tuesday, driving the Dow Jones industrial average down in its worst slide since the aftermath of the September 11 attacks, as a sell-off in China's stock market raised concerns that equity valuations may be too high.
A U.S. government report showing a bigger-than-expected drop in January's new orders for U.S.-made durable goods added to investors' concerns about the outlook for economic growth and corporate profits. Those worries added more fuel to the sell-off and helped contribute to a loss of about $600 billion in market value for the day.
The New York Stock Exchange's closing bell was greeted with a chorus of "boos" from the trading floor. A surge in trading volume triggered a technical glitch in late afternoon, contributing to an abrupt swing in the Dow average, which briefly fell 500 points. A Dow Jones Indexes spokeswoman said the glitch did not affect stock prices.
Investors dumped stocks with the biggest exposure to Chinese demand, including Caterpillar Inc., whose shares slid 3.6 percent, while Tuesday's sell-off wiped out the year's gains for all three major U.S. stock indexes.
"There seems to be just an air of nothing is safe anymore, there's nowhere to go and people are rotating into bonds as a safe haven," said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey.
The Dow Jones industrial average slid 416.02 points, or 3.29 percent, to end at 12,216.24. The Standard & Poor's 500 Index dropped 50.33 points, or 3.47 percent, to finish at 1,399.04. The Nasdaq Composite Index sank 96.65 points, or 3.86 percent, to close at 2,407.87.
GOODBYE TO THE YEAR'S GAINS
At one point, the Dow fell as much as 546.20 points, or 4.32 percent, to a session low at 12,086.06. It was its biggest one-day point decline since after the September 11, 2001, attacks. Both the Dow and the S&P 500 had their worst one-day percentage drop in almost four years, while the Nasdaq had its worst day since December 2002.
For the year to date, the Dow was down about 2 percent, while the S&P 500 was down about 1.36 percent and the Nasdaq was down about 0.31 percent.
The yield on the benchmark 10-year U.S. Treasury note dropped to 4.50
percent, the lowest since late December, as investors bought bonds in a flight
to quality. The 10-year note's price, which moves in the opposite direction of
its yield, rose more than a full point, or 1-1/32, to 101.
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