As evidence of a slowing global economy grows, investors are showing some caution just one week after U.S. stocks hit an all-time high.
Stocks fell Wednesday after lackluster earnings from Bank of America and an apparent drop in demand for Apple's iPod and iPhone dragged financial and technology stocks lower. New signs of weakness in Europe, where car sales are plunging and unemployment is rising, also weighed on the market.
On Monday, stocks sank after China reported economic growth that was slower than economists had expected. Metals, energy and other commodities have been hit hard this week and that has dragged down the stocks of miners and drillers and companies that provide services to them. Gold fell the most in 30 years.
The Dow Jones Industrial Average fell 138 points, or 0.9 percent, to 14,618.59 Wednesday, wiping out most of the gain it made Tuesday. The Dow, which reached an all-time high of 14,865 last Thursday, is down 1.7 percent this week after slumping 265 points on Monday.
The Standard & Poor's 500 index dropped 22 points, or 1.4 percent, to 1,553 and is 2.2 percent lower since the opening bell on Monday. The S&P is 2.5 percent below its all-time high of 1,593.
Energy companies and miners fell as commodity prices extended their declines.
The price of crude oil dropped for the fourth day in five, falling 2.3 percent to $86.68 per barrel, based on expectations that global demand will fall. Copper fell to an 18-month low of $3.19 a pound.
As stock prices sank, investors sought the safety of bonds. The yield on the 10-year Treasury note, which moves inversely to its price, fell to 1.70 percent from 1.73 percent. It went as low as 1.68 percent, matching its lowest level of the year.
Despite the big drops this week, the Dow is still 11.6 percent higher this year, the S&P 500 index 8.8 percent. And while falling energy prices may hurt energy stocks now, in the long run they should put more money into the pockets of consumers and drive spending.
Stocks surged during the first three months of the year on optimism that a recovery in the housing market would boost the economy. But the stock market has struggled this month. Reports of weak hiring and retail sales suggested the economy may be cooling off.
"You've had numerous economic data points that have been, not really disastrous, but not really as robust as people might like," said Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors. "When you have a market as extended as this, you almost need perfect information to make it continue to go up."
Reports this week have added to a picture of slowing global growth.
New car sales in Europe fell 10 percent in the first quarter, the European automakers association said Wednesday, as high unemployment saps demand for big purchases. Britain said Wednesday that unemployment rose to 7.9 percent during the three months ending in February, an increase of 0.2 percent from the previous three months.
On Tuesday, the International Monetary Fund lowered its outlook for global growth this year to 3.3 percent from 3.5 percent, saying government spending cuts will slow the U.S. and European economies. And on Monday China said its economic growth slowed in the first three months of the year to 7.7 percent, below the 8 percent level anticipated by markets.
Bank of America fell 4.7 percent to $11.70, leading a broad decline in financial stocks, after reporting a first quarter profit of $2.3 billion that fell short of analysts' expectations.
Technology stocks also fell sharply, led by Apple. The Nasdaq composite index fell 59.96 points, or 1.8 percent, to 3,204. Apple, which makes up 8 percent of the index, slumped 5.5 percent to $402.80, after a supplier hinted at a slowdown in iPhone and iPad production.
Corporate earnings for the first quarter suggest that growth has been slow and steady, rather than robust as investors had hoped, said Kevin Mahn, president of Hennion and Walsh Asset Management. Consumers and businesses are still reluctant to ratchet up spending.
"We're moving ahead, but begrudgingly and very slowly," said Mahn, "I don't think that the plow horse is going to start stepping backwards but it certainly doesn't have the capacity to start speeding up, at least right now."
Analysts expect first-quarter earnings to rise by 1.6 percent, compared with growth of 7.7 percent in the fourth quarter, according to data from S&P Capital IQ. So far, 56 companies have reported earnings this year and 35 have beaten expectations.
Stocks stayed lower Wednesday even after the Federal Reserve reported that a strengthening housing recovery and robust auto sales contributed to moderate economic growth across the United States in late February and March.
Among other stocks making big moves, Textron, a maker of small aircraft, plunged $3.94, or 14 percent, to $25.41 after the company cut its outlook for business jet deliveries. Fairway climbed 34 percent to $17.35 on its stock market debut, even after the grocery store chain priced its initial public offering above expectations.
Gold edged lower Wednesday, falling $4.70, or 0.3 percent, to $1,382.70 an ounce. The metal has stabilized after dropping $140 an ounce, or 9 percent, on Monday.
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