U.S. stocks fell sharply in afternoon trading Monday, pushing down the Dow Jones industrial average more than 260 points as investors worried about reports of sluggish growth in the U.S. economy. The decline adds to losses racked up by the market in January.
KEEPING SCORE: The Dow Jones industrial average was down 206 points, or 1.3 percent, to 15,491 at 12:49 p.m. Eastern. It had fallen as much as 262 points. The Standard & Poor's 500 index lost 26 points, or 1.5 percent, to 1,756. The Nasdaq composite slipped 72 points, or 1.8 percent, to 4,031.
MORE PAIN: A rough first day of trading in February extends January's stock-market stumble. Concerns about the global economy, U.S. company earnings, as well as turmoil in emerging markets, led the Dow to its worst January since 2009. The index slid 5.3 percent while the S&P 500 index fell 3.6 percent.
Investors are watching to see whether the market's performance worsens into what some say is an overdue correction in the market, or a drop of 10 percent.
"There's been a pretty significant change in sentiment for the market," says Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank. "We're down now more than 5 percent from the highs we reached at the end of last year. So that's something a lot of people will be watching."
FACTORIES SLOW: U.S. factories cut back sharply on production and new orders plunged, according to the Institute for Supply Management, a trade group of purchasing managers. The group said Monday that its index of manufacturing activity fell to 51.3 in January from 56.5 in the previous month. That's the lowest reading since May and suggests that factories are slowing slightly at the start of the year.
CONSTRUCTION SPENDING SLUGGISH: U.S. construction spending rose modestly in December, slowing from healthy gains a month earlier. The Commerce Department said Monday that construction spending increased a scant 0.1 percent, down from a revised 0.8 percent increase in November.
SPINNING OUT: Ford shares slipped 44 cents, or 3 percent, to $14.51 and General Motors shares fell 69 cents, or 1.9 percent, to $35.39 after the automakers reported a drop in U.S. January sales, hurt by harsh weather that kept customers away from dealerships. GM sales fell 12 percent, while Ford said sales fell 7 percent. Chrysler bucked the trend with U.S. sales gains of 8 percent. Still, analysts expect U.S. auto sales to reach more than 16 million this year -- a return to pre-recession levels.
WEAK SIGNAL: All 10 sectors in the S&P 500 index fell, and telecommunications services posted the biggest decline, weighed down by AT&T and Verizon Communications. Verizon slid $1.21, or 2.5 percent, to $46.82. AT&T fell $1.10, or 3.3 percent, to $32.23. The stock is down more than 8 percent this year. The company began offering reduced cellphone rates over the weekend for family plans with large amounts of data. AT&T hopes customers will upgrade from lower-use plans.
HEALTHY SELL-OFF: "The selling is an extension of last week's activity," says Frank Davis, director of trading at LEK Securities. "It looks like a healthy sell-off."
Davis anticipates that the sell-off will continue, especially since most of the economic data coming out in the next few weeks is data could have been negatively affected by the severe winter weather in the U.S.
DRUG BOOST: Some stocks posted gains. Pfizer gained 67 cents, or 2.2 percent, to $31.07, after the company reported that a mid-stage study of an experimental drug for advanced breast cancer met the main goals. The drug is seen as a potential huge seller. Pfizer was one of just two gainers among the 30 stocks in the Dow.
TOY STORY: Mattel fell $1.70, or 4.5 percent, to $36.15. The world's largest maker of toys reported on Friday that sales of Barbie and Fisher-Price preschool items dropped in its fourth quarter.
DEAL DOUBTS: Jos. A Bank Clothiers fell $2, or 3.6 percent, to $54.22 in afternoon trading on continued doubts that a takeover bid by rival clothier Men's Wearhouse will go through. The two retailers have been dueling since October when Jos. A. Bank offered $2.3 billion for Men's Wearhouse.
SAFETY DANCE: Facing lower stocks and global jitters, investors moved into the relative safety of U.S. government bonds. Bond prices rose, and the yield on the U.S. 10-year Treasury note fell to 2.61 percent from 2.65 percent on Friday. The 10-year has had a dramatic move in the last two weeks. In mid-January, the 10-year note was trading at a yield around 2.9 percent.
CHINA JITTERS: Fresh signs of weakness in a survey about manufacturing in China added to lingering worries about developing economies. The official Chinese manufacturing survey released over the weekend showed factory output grew at a slower rate in January compared with December. That survey followed a HSBC survey that showed a contraction in China's manufacturing.