Stocks saw considerable weakness during trading on Monday but ended the session well off their worst levels of the day. Troubling news from overseas weighed on the markets in early trading, but selling pressure waned as they day progressed.
The major averages climbed well off their lows for the session but still closed firmly in negative territory. The Dow closed down 102.09 points or 0.8 percent to 12,927.17, the Nasdaq fell 30.00 points or 1 percent to 2,970.45 and the S&P 500 dropped 11.59 points or 0.8 percent to 1,366.94.
The sell-off seen in early trading came on the heels of some disappointing economic data from overseas, including a report from HSBC Holdings and Markit Economics showing a continued contraction in Chinese manufacturing activity in the month of April.
While the manufacturing purchasing managers' index for China climbed to 49.1 in April from 48.3 in March, a reading below 50 indicates a contraction.
A separate report from Markit showed that its index of private sector activity in the Eurozone dropped to a five-month low of 47.4 in April from 49.1 in March.
Markit Chief Economist Chris Williamson said, "The flash PMI signaled a faster rate of economic contraction in the Eurozone during April, extending what appears to be a double-dip recession into a third consecutive quarter."
Traders also reacted negatively to news that French President Nicolas Sarkozy came in second in a first round of voting, losing to socialist Francois Hollande.
Sarkozy is expected to face an uphill battle in a run-off election against Hollande on May 6th, raising concerns about a setback to efforts to diffuse the European debt crisis.
Among individual stocks, shares of Kellogg (K) came under pressure after the cereal market lowered its full-year 2012 financial guidance based on a weaker-than-expected first quarter performance. Kellogg fell by 6.1 percent to a two-month closing low.
Retail giant Wal-Mart (WMT) also posted a notable loss on the day, sliding by 4.7 percent after the New York Times reported on bribery allegations at the company's Mexico unit. Wal-Mart confirmed that it is probing possible violations of the U.S. Foreign Corrupt Practices Act.
Pfizer (PFE) posted a more modest loss after the drug giant announced that it has entered into an agreement to sell its infant nutrition business to Nestlé for $11.85 billion in cash.
While significant weakness was visible in a variety of sectors, gold stocks turned in some of the market's worst performances on the day. Reflecting the weakness in the gold sector, the NYSE Arca Gold Bugs Index fell by 2.4 percent to a nearly two-year closing low.
The weakness among gold stocks came amid a decrease by the price of the precious metal, with gold for June delivery sliding $10.20 to $1,632.60 an ounce.
Steel stocks also posted steep losses amid concerns about the outlook for global demand following the disappointing data from overseas. The NYSE Arca Steel Index fell by 2.2 percent amid notable losses by L.B. Foster (FSTR), ArcelorMittal (MT), and Gibraltar Industries (ROCK).
Considerable weakness was also visible among housing stocks, as reflected by the 2.3 percent loss posted by the Philadelphia Housing Sector Index. Airline, networking, and retail stocks also saw significant weakness on the day.
In overseas trading, stock markets across the Asia-Pacific region moved to the downside during trading on Monday. Japan's Nikkei 225 Index edged down by 0.2 percent, while Hong Kong's Hang Seng Index tumbled by 1.8 percent.
The major European markets also came under considerable selling pressure. While the U.K.'s FTSE 100 Index fell by 1.9 percent, the French CAC 40 Index and the German DAX Index plummeted by 2.8 percent and 3.4 percent, respectively.
In the bond market, treasuries showed a strong upward move amid the global economic concerns. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.7 basis points to a nearly two-month closing low of 1.933 percent.
Earnings news is likely to be in focus on Tuesday, with Dow components 3M (MMM), AT&T (T), and United Technologies (UTX) among the companies scheduled to release their quarterly results before the start of trading.
Economic data may also attract some attention, as reports on home prices, new home sales and consumer confidence are due to be released.
Nonetheless, trading activity may be somewhat subdued ahead of the Federal Reserve's monetary policy announcement on Wednesday.
by RTT Staff Writer
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