NEW YORK (AP) — A quiet start on Wall Street quickly turned into a rout Thursday as the bad news piled up.
Commodity prices slumped in early trading after a report said manufacturing in China fell this month.
, the Philadelphia branch of the Federal Reserve reported a sharp contraction in manufacturing in the Northeast.
The report, the worst since last August, helped knock the Dow Jones industrial average down about 40 points.
By the afternoon, the Dow had dropped 199 points to 12,624, a loss of 1.6 percent.
Alcoa lost 32 cents to $8.60, leading a broad fall in commodities and materials companies.
The benchmarkgauge has still dropped 8.9 percent from its peak on March 16amid concern that the euro area’s debt crisis has triggered aslowdown in global economic growth.
The Standard & Poor’s 500 index lost 22 points to 1,333, a decline of 1.7 percent.
The late morning blows to investor confidence were just the latest reasons for people to pull money of out stocks.
Earlier Thursday, the Labor Department reported that the four week average of applications for unemployment benefits, a figure closely watched by economists, jumped to the highest level since September.
The National Association of Realtors also reported that sales of previously occupied homes dropped 1.5 percent in May.
All this a day after the Federal Reserve slashed its estimates for US economic growth and said it would extend a bond buying program through the end of the year, disappointing investors who had hoped for bolder steps from the central bank to get the economy going again.
“What’s worse is that things are getting weaker without the Fed coming in,” said Rex Macey, chief investment officer at Wilmington Trust Investment Advisors.
“We had a run up in the market this month because people had been expecting Fed action. Today, the market is giving it back.”.
A manufacturing survey for countries that use the European currency also showed a contraction.
The Philadelphia Fed index pushed Treasury prices up and yields down as traders shifted money into the their favorite hiding spot.
The yield on the 10 year note slipped to 1.61 percent, down from 1.63 percent late Wednesday.
Material and energy companies, whose fortunes are closely tied to economic swings, led eight of the 10 industry groups within the S&P 500 index lower.
Utilities and telecommunication companies, which are considered defensive investments because of their reliable cash flows and rich dividends, edged higher.
In Europe, auditors calculated that Spain’s troubled banks need as much as €62 billion ($78.76 billion).
Adrian Zuckerberg is a business journalist based in Sydney, Australia. Adrian has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Adrian spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.