Wall Street closed Monday with sharp losses as investors sold off stocks amid concerns about an inflated market and recent indicators on consumer spending.
The Dow Jones Industrial Average fell 186.06 points, to close at 9,135.34. The broader Standard & Poor’s 500-stock Index fell 24.36 points, to close at 979.73, and the tech-heavy Nasdaq fell 54.68 points, to close at 1,930.84.
Stock prices began to fall late last week following downbeat reports from the public and private sectors about consumers and retail spending.
On Thursday, Wal-Mart Stores Inc., the world’s largest retailer, reported a second-quarter decline in domestic sales, which was followed by reports Friday that consumer confidence dropped in early August and consumer prices were unchanged in July.
Investors received more bad news Monday when Lowe’s home-improvement stores reported that second-quarter profits declined 19.1 percent, compared with the previous quarter. Shares fell by $2.36, or 10.34 percent, to $20.47.
Consumer spending makes up roughly 70 percent of the U.S. economy. The major indexes closed down about 1 percent on Friday.
Analysts expected the sell-off Monday, considering the markets’ big rally since hitting 12-year lows in early March and the fact that any movement during light trading in August can result in big swings.
“I think it’s normal to expect this, given the surge we’ve had in equity prices,” said Brian Lipps, a branch manager for Charles Schwab & Co. “There is some fear we’ve overshot the economic reality.”
He also said the consumer-spending numbers are really a symptom of larger concerns: persistent unemployment and corporate profits driven largely by cost-cutting.
“There’s a lack of revenue growth,” Mr. Lipps said.
This year, the Dow is up 545.01 points, or 6.2 percent. The S&P is up 100.84, or 11.2 percent, and the Nasdaq is up 408.49, or 25.9 percent.
The markets fell by at least 2 percent Monday as investors moved to safer Treasury notes. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.47 percent from 3.57 percent late Friday.
The losses, the biggest in roughly six weeks, began Monday in overseas trading before the U.S. markets opened.
Japan’s Nikkei stock average closed down 3.1 percent, despite news the country had emerged from recession in the second quarter. Britain’s FTSE 100 closed down 1.46 percent, Germany’s DAX index closed down 2.02 percent, and France’s CAC-40 closed down 2.16 percent.
Gold prices fell, and the dollar fell against other major currencies. Oil prices continued to drop amid concerns about low demand during the recession. A barrel of light crude fell 76 cents, to $66.75 a barrel, on the New York Mercantile Exchange.