By Chris Dieterich
U.S. stocks fell Monday as uncertainty about China's growth
injected caution into global markets.
The Dow Jones Industrial Average slid 85 points, or 0.5%, to
17193 in afternoon trading. The S&P 500 shed 17 points, or
0.8%, to 1994 and the Nasdaq Composite Index declined 61 points, or
1.4%, to 4517.
Stocks' cautious 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 to 2.567% from
2.589% late on Friday. Treasury yields fall when prices rise.
Shares of Caterpillar, a bellwether maker of mining and
construction equipment, tumbled 1.5% and was among the biggest
decliners on 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 1.7% to a 3 1/2 -month
low.
Mr. Abbasi 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.
"Today there is a lot of reflection, and people are digesting
last week's moves," Mr. Abbasi said, noting a preference on the
part of traders in recent days for shares of the largest U.S.
companies. The Russell 2000 index of small companies fell hardest
on Monday, dropping 1.5%.
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% on Monday after shares soared 38% in
the company's initial public offering on Friday.
Apple edged down 0.2% 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 3.9% 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 lagging
companies that look underpriced, including retailers.
Mr. Fox conceded that with indexes at all-time highs, it has
become harder 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 0.9% to $90.82
a barrel. Gold futures rose 0.1% to $1,217.60 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 34%.
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
2.7%.
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 1.2%.
Write to Chris Dieterich at chris.dieterich@wsj.com