US stocks skid as China sell-off rocks markets

NEW YORK: US stocks slumped Monday as a sharp Chinese equity sell-off weighed on sentiment amid worries over the global economic prospects of recovery from a steep recession.

The Dow Jones Industrial Average dropped 80.00 points (0.86 percent) to 9,462.20 at 1505 GMT.

The tech-rich Nasdaq composite skidded 22.94 points (1.13 percent) to 2,005.83 and the broad-market Standard Poor's 500 index lost 11.04 points (1.07 percent) to 1,017.89.

"Widespread losses in foreign markets, which were led by a 6.7 percent decline in the Shanghai Composite, have prompted valuation concerns that are interfering with the bullish sentiment," Patrick O'Hare of said.

"We suspect the understanding that September has been the weakest month historically for the stock market hasn't been lost on participants either," he added.

Wall Street stocks followed major European and Asian markets lower after the Shanghai Composite index saw its biggest one-day drop since June 2008, amid concerns over slowing lending growth and a new share supply glut, dealers said.

The Shanghai sell-off stoked worries over Chinese demand growth, driving crude oil prices lower.

"We are keeping a close eye on the global equity markets, expecting to see the pullback that has been in place in China for the last four weeks to possibly intensify and spill over into other global markets, including New York, as traders finally begin harvesting some trading profits generated over the last six months," said Fred Dickson of DA Davidson Co.

A historic victory by the Democratic Party of Japan on Sunday that ended more than half a century of almost unbroken conservative rule raised uncertainty about the direction of the world's second-largest economy.

In the US, the Institute of Supply Management-Chicago purchasing managers index rose to 50.0, the break-even point between growth and contraction, from 43.4 in July, adding to reports showing a pick-up in the battered manufacturing sector.

Wall Street had two big mergers to digest on the final day of August that kicks off a week heading into a long holiday weekend, with the US markets closed Monday for the Labor Day holiday.

The Walt Disney Co. announced it had agreed to buy Marvel Entertainment Inc., whose stable of characters includes "Spider-Man," "Iron Man" and the "X-Men," in a stock and cash deal valued at four billion dollars.

Disney fell 1.86 percent to 26.34 dollars and Marvel Entertainment soared 26.26 percent to 48.80 dollars.

DreamWorks Animation SKG gained 4.42 percent to 33.09 dollars.

Oilfield services giant Baker Hughes plummeted 6.90 percent to 35.46 dollars after announcing it had agreed to buy rival BJ Services in a cash-and-stock deal worth 5.5 billion dollars. BJ Services leapt 7.58 percent to 16.60 dollars.

Among stocks in focus, Caterpillar, sometimes seen as a bellwether of economic activity, dropped 1.91 percent to 45.82 dollars.

Aerospace giant Boeing skidded 2.55 percent to 49.74 dollars and aluminum maker Alcoa slid 2.48 percent to 12.19 dollars.

The Wall Street action came after the market closed Friday up some 50 percent from lows hit in March, but with investors beginning to turn cautious. The blue-chip Dow fell 0.38 percent, snapping an eight-day winning streak.

Bonds rose. The yield on the 10-year US Treasury bond fell 3.436 percent from 3.451 percent Friday and that on the 30-year bond advanced to 4.220 percent from 4.208 percent. Bond yields and prices move in opposite directions.