By Chris Dieterich
Stocks fell Monday as uncertainty about China's growth injected
caution into global markets.
The Dow Jones Industrial Average slid 107.06 points, or 0.6%, to
17172.68, snapping a streak of five straight advances.
The S&P 500 shed 16.11 points, or 0.8%, to 1994.29, and the
tech-oriented Nasdaq Composite Index declined 52.10 points, or
1.1%, to 4527.69.
The market's downbeat tone began overnight, after China's
financial minister said major changes to the country's economic
stimulus efforts aren't likely even as the world's second-largest
economy grapples with growth concerns. That statement damped hopes
for more aggressive policies and pushed Treasurys higher, while
driving copper and nickel lower. China is a key consumer of base
metals.
The yield on benchmark 10-year Treasury notes fell to 2.567%
from 2.589% late on Friday. Treasury yields fall when prices
rise.
Traders said Mondays' action was the work of short-term traders
reshuffling positions after last week's full slate of events that
included a rate decision by Federal Reserve officials, a vote on
Scottish independence and the trading debut of Chinese e-commerce
company Alibaba Group. The Dow rose 1.7% last week and closed
Friday at its 18th record high of 2014.
Declines were broad on Monday, with consumer-discretionary
stocks leading all 10 of the S&P 500's industry groups lower.
Shares of Caterpillar, a bellwether maker of mining and
construction equipment that is highly dependent on sales to
emerging economies, tumbled 1.6%, among the biggest slides by
members of the Dow.
Yousef Abbasi, a market strategist at brokerage JonesTrading
Institutional Services, said that selling in emerging-market stocks
helped fuel the market's downbeat mood. The iShares MSCI Emerging
Markets exchange-traded fund dropped 1.5% to a 3 1/2 -month low on
heavier than average volumes.
"Today there is a lot of reflection, and people are digesting
last week's moves," Mr. Abbasi said.
Concern about Chinese growth has ramped up in recent weeks after
data showed the country's industrial output growth slowed to its
lowest level since the 2008 financial crisis. Due on Tuesday is an
initial reading on September's Chinese manufacturing activity from
HSBC.
Hong Kong's Hang Seng Index dropped 1.4%, while Japan's Nikkei
fell 0.9%. In Europe, the Stoxx Europe 600 index fell 0.5%, and the
U.K.'s FTSE 100 declined 0.9%.
U.S. stocks continued lower after a reading on August
existing-home sales showed a monthly decline for the first time in
five months
Alibaba Group declined 4.3% on Monday after shares soared 38% in
the company's initial public offering on Friday.
Apple edged up 0.1% after the company announced it sold more
than 10 million of its new iPhone 6 and iPhone 6 Plus devices over
their first weekend.
Traders have been building protective positions in recent weeks
as stocks climbed back to all-time highs, said Stacey Gilbert, head
of derivatives strategy at Susquehanna Financial Group. She said
that prices for "put" options on the S&P 500 index, contracts
that are used to hedge against stock-market declines, have risen
above those of bullish "call" options.
"Investors are certainly protective as we head into the end of
the year, " Ms. Gilbert said.
Still, most long-term investors contend that the outlook for
stocks remains positive even after a 3.6% advance for the Dow in
2014.
"The reality is that [the economy is] growing, interest rates
are low, companies are growing their profits and stocks are at fair
value," said John Fox, director of research at Fenimore Asset
Management, a $1.9 billion firm in Albany, N.Y. Mr. Fox said his
firm has stepped into the market this year to buy shares of
companies that look underpriced, including retailers.
Mr. Fox conceded that with indexes at all-time highs, it has
become more difficult to find stocks that look reasonably
priced.
"It's hard to find discounts," he said. "We're busy meeting with
companies trying to find stuff that's cheap."
In commodity markets, crude-oil futures declined 1% to settle at
$91.52 a barrel. Gold futures rose 0.1% to $1,216.80 a troy ounce.
The dollar fell against the euro and yen.
In deal news, German pharmaceutical company Merck KGaA said
Monday it agreed to acquire Sigma-Aldrich Corp. for $17 billion.
Shares of Sigma-Aldrich jumped 33%.
Germany's Siemens AG said it agreed to acquire Dresser-Rand
Group Inc., a U.S. oil-equipment maker, in a deal worth $7.6
billion, or $83 a share in cash. Shares of Dresser-Rand Group rose
2.6%.
EMC Corp. is considering options that could include a merger,
The Wall Street Journal reported. EMC is under pressure to break up
from hedge fund Elliott Management Corp. EMC shares added 0.5%.
Write to Chris Dieterich at chris.dieterich@wsj.com