- The Washington Times - Tuesday, September 1, 2009

NEW YORK (AP) — After giving the stock market solid gains during August, investors still worried about the economy backtracked a bit during the final day of the month.

Stocks fell in light trading Monday after a plunge in China’s main stock market sent a wave of selling around the world and added to concerns that stocks have rocketed too high, too fast.

The Standard & Poor’s 500 index, which is the basis for many mutual funds, ended August higher to post its sixth straight monthly gain. It is up 50.9 percent since early March, the best run since 1938.

The milestone brought little comfort to investors who are more concerned with the uncertainties of the future. A 6.7 percent drop in China’s main stock index rattled traders who were already on edge that they will have to slog through a tougher market in the fall.

September has been the worst month for the stock market over the past 80 years, and it begins with many analysts already worried that investors have bet too soon on a recovery. Data due Tuesday on manufacturing and employment on Friday could upend the market’s six-month-old rally or help push it forward.

The drop in U.S. stocks Monday was broad and a 48-point drop in the Dow Jones industrial average was the biggest in two weeks. Energy and materials stocks fell the most as prices for commodities like crude and copper plummeted.

The retreat shaved some gains from the best August since 2000. For the month, the Dow rose 3.5 percent, the S&P 500 index added 3.4 percent and the Nasdaq rose 1.5 percent.

Since tumbling to a 12-year low in March, the Dow is up 45.1 percent since March and the Nasdaq is up 58.4 percent.

“The markets have been looking like they’ve been somewhat reluctant to hold their gains over the last couple of sessions,” said Blaze Tankersley, chief market strategist at Bay Crest Partners, adding that the news out of China provided investors with a good excuse to sell.

According to preliminary calculations, the Dow fell 47.92, or 0.5 percent, to 9,496.38. The S&P 500 index fell 8.31, or 0.8 percent, to 1,020.62, while the Nasdaq fell 19.71, or 1 percent, to 2,009.06.

Three stocks fell for every one that rose on the New York Stock Exchange, where volume came to a light 1.4 million shares, compared with 1.2 billion Friday. Light volume can skew price moves. It is typically light in late summer as some traders take vacations.

Japan’s Nikkei stock average fell 0.4 percent after the country’s opposition party came to power in a landslide victory. Germany’s DAX index fell 0.9 percent, while France’s CAC-40 lost 1.1 percent. The London Stock Exchange was closed for a holiday.

Oil prices tumbled $2.78 to settle at $69.96 a barrel on the New York Mercantile Exchange. The price of copper fell 4.2 percent. Gold also fell as the dollar moved higher against other major currencies.

Demand for the safety of government debt rose, underscoring the market’s uneasiness. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.41 percent from 3.45 percent late Friday.

Two big acquisitions totaling close to $10 billion did little to excite investors. The Walt Disney Co. said it plans to buy Marvel Entertainment Inc. for $4 billion in cash and stock, while oilfield services company Baker Hughes Inc. said it will buy BJ Services Co. in a cash-and-stock deal valued at $5.5 billion.

Investors also looked past a report showing an improvement in Midwest business conditions. The Chicago Purchasing Managers index, which measures business activity in Illinois, Michigan and Indiana, jumped to 50.0 in August from 43.4 in July, ending 10 consecutive months of drops.

The index is considered a precursor to the Institute for Supply Management’s manufacturing index, which is due Tuesday. A reading above 50 indicates growth in manufacturing, something that hasn’t happened since January 2008.

Trading is expected to be light this week but there are still several important reports on the economy that could sway the market one way or the other.

The most closely watched data will come from the government’s monthly jobs report on Friday. Economists are expecting another 220,000 jobs were lost, down from 247,000 in July.

Last month’s report showed an unexpected dip in the unemployment rate and investors are anxious to see whether the rate continues to fall. If fewer jobs are being lost, consumers might start to feel comfortable spending again and help get the economy back on its feet.

Analyst reports on Monday perhaps fanned investors’ jitters about September, bringing reminders that the month often brings trouble for stocks. It was nearly a year ago that the market slide turned into a plunge with the mid-September collapse of Lehman Brothers and the freeze in credit markets that made the recession tighten.

Sam Stovall, chief investment strategist, U.S. equity research at Standard & Poor’s, noted that since 1929 the S&P 500 index has lost an average 1.3 percent for the month. But in the 14 Septembers that followed the end of down markets, the index has gained about 2 percent.

In other trading, the Russell 2000 index of smaller companies fell 7.79, or 1.3 percent, to 572.07.

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