U.S. stocks fell Monday, sending benchmark indexes to their biggest declines since June, as a gauge of manufacturing in the world's largest economy retreated more than estimated.
The Dow Jones industrial average closed down 326.05 points, or 2.08%, at 15,372.80; the S&P 500 fell 40.70, or 2.28%, ending at 1,741.89; and the Nasdaq composite closed down 106.92 points, or 2.61%, at 3,996.96. All numbers are preliminary.
“Everyone walked in this year expecting a continuation of at least growing economic activity, and the latest data we've been seeing throw a bit of cold water on that theory,” Bill Schultz, chief investment officer who oversees about $1.1 billion at McQueen Ball & Associates, said by phone. “Economic activity was not as strong as people expected. People are taking a pause, reassessing where they stand.”
The S&P 500 retreated 3.6% in January, its worst opening month since 2010, as the gauge retreated in each of the month's final three weeks, the longest streak since 2012.
The S&P 500 has dropped as the Federal Reserve trimmed its bond-buying program for the second time in as many months and emerging markets currencies tumbled amid signs of slowing growth in China. The country's official Purchasing Managers' index decreased to a six-month low in January as output and orders slowed.
Data Monday showed factory activity in the U.S. expanded in January at the weakest pace in eight months as orders slumped, a sign manufacturing cooled at the start of the year along with the weather.
The Institute for Supply Management's factory index decreased to 51.3 from 56.5 the prior month, the group's report showed. The median forecast of 85 economists surveyed by Bloomberg called for a decrease to 56. Readings above 50 indicate expansion.
Fed policymakers said on Jan. 29 that the central bank will trim its monthly bond purchases by $10 billion to $65 billion, cutting the pace of stimulus for a second straight meeting because of an improving economy.
“The market is adjusting to the Fed taking the punch bowl away,” Douglas Cote, chief market strategist at ING U.S. Investment Management, said in a telephone interview. His firm oversees about $200 billion. “The fundamentals remain solid. Even though we're in the correction phase, ultimately the path for the market is up.”