Wall Street marks first big loss of 2012

NEW YORK Tue Mar 6, 2012 6:05pm EST

Specialist trader Joseph Dreyer (L) of Knight Capital works at the post that trades Carnival Cruise lines on the floor of the New York Stock Exchange, February 28, 2012. REUTERS/Brendan McDermid

Specialist trader Joseph Dreyer (L) of Knight Capital works at the post that trades Carnival Cruise lines on the floor of the New York Stock Exchange, February 28, 2012.

Credit: Reuters/Brendan McDermid

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NEW YORK (Reuters) - The Dow dropped more than 200 points on Tuesday, handing Wall Street its worst day in three months on renewed fears of a disorderly default in Greece and concerns that China's slowdown would hit global growth.

Analysts have expected a pullback for weeks, citing an overstretched market. Despite the day's decline, the S&P 500 is still up almost 7 percent for the year. If fourth-quarter gains are included, the benchmark index is still up almost 20 percent since September 30.

Wall Street's anxiety gauge, the CBOE Volatility Index or VIX .VIX, jumped about 16 percent to near 21, rising above its 50-day moving average for the first time since November. About 10 stocks fell for every one that rose the New York Stock Exchange, with bank and miner shares among the top decliners.

Equities' recent rally has continued without a substantial pullback since December, supported in part by expectations that Europe's credit crisis would be contained and China's economy could avoid a hard landing.

"It might be just time we have a bit of a pullback here as this market begins to reassess what the future growth prospects for the year look like," said Burt White, managing director and chief investment officer at LPL Financial in Boston.

The Dow Jones industrial average .DJI slid 203.66 points, or 1.57 percent, to close at 12,759.15. The Standard & Poor's 500 Index .SPX dropped 20.97 points, or 1.54 percent, to 1,343.36. The Nasdaq Composite Index .IXIC fell 40.16 points, or 1.36 percent, to end at 2,910.32.

It was the Dow's first drop of more than 200 points since November 23. The last time the S&P 500 fell more than 1 percent was in late December.

Apple Inc (AAPL.O) shares fell, but outperformed the broader market after volatile swings in recent days. The stock closed down 0.5 percent at $530.26 on Tuesday.

Europe's downturn appeared ready to turn into a full-fledged recession due to a collapse in household spending, exports and manufacturing in the final months of 2011, the European Union said.

Brazil's gross domestic product expanded by a meager 2.7 percent in 2011, data showed Tuesday, adding to concerns after China cut its growth outlook earlier in the week. Expected growth in emerging markets has been a main catalyst for equities' gains.

A group representing Greek bondholders warned a default could cause more than 1 trillion euros ($1.3 trillion) of damage to the region. Creditors have until Thursday night to accept a bond swap in which they would lose almost three-quarters of the value of their bonds.

As part of a reassessment of possible collateral damage if the Greek deal with private debt holders collapses, traders sold the stocks of large banks on concern about their exposure to Greece.

The S&P financial sector index .GSPF dropped 2.5 percent and the KBW bank index .BKX fell 2.7 percent. Morgan Stanley (MS.N) lost 5.3 percent to $17.32.

Greece has no plans to extend the deadline on its bond-swap offer to private creditors, officials said, dismissing market rumors that the date may be changed to increase participation in the offer.

Basic materials stocks also tumbled as commodity prices fell, pressured further by a stronger U.S. dollar.

Aluminum producer Alcoa Inc (AA.N) lost 4.1 percent to $9.47 and Freeport-McMoRan Copper & Gold Inc (FCX.N) fell 2.5 percent to $39.44.

Utilities, a traditional defensive play, were the best-performing S&P sector during Tuesday's slide. An S&P utility sector index .GSPU ended the day down 0.5 percent.

Volume was slightly heavy with about 7.6 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, above the daily average of 6.9 billion.

(Reporting By Angela Moon; Additional reporting by Caroline Valetkevitch; Editing by Jan Paschal)

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Comments (16)
Larry2012 wrote:
Wait a minute. How can REUTERS report that China is trimming it’s growth and failing to report that it is increasing it’s defense budget by 11%? My question is WHY would China feel it necessary to spend more money defending itself? Against WHAT? Perhaps Obama is going to send troops in to wipe out the government in order to avoid paying them back? I sure would like to hear “the rest of the story”. Where are you when we need you Paul Harvey?

Mar 05, 2012 9:21pm EST  --  Report as abuse
SanPa wrote:
One day its Greece. The next, Romney. And then the perennial favorite — feisty Persians. Personally, I think market participants have realized that the train has been off the tracks for several miles.

Mar 06, 2012 9:24am EST  --  Report as abuse
Harry079 wrote:
We take the pressure and we throw away
Conventionalitly belongs to yesterday
There is a chance that we can make it so far
We start believing now but we can be who we are

Greece is the word

Mar 06, 2012 9:34am EST  --  Report as abuse
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