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US stocks tumbled on Tuesday, sending the benchmark S&P 500 index to its biggest one-day slide in more than 3-1/2 years as a sell-off in China's equity market fanned worries that stock valuations there are too high and some data indicated US economic growth may slow.
With an hour left to trade, the Dow Jones industrial average fell more than 500 points. But within minutes, the Dowcut some of that loss by more than 100 points. Traders said the late-hour slide may have been precipitated by programme trades heading toward the close.
"As the afternoon has progressed, there seems to be a sense of panic among some professional investors. There's talk about margin calls," said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey.
"There seems to be just an air of nothing is safe anymore, there's nowhere to go and people are rotating into bonds as a safe haven."
The Dow Jones industrial average was down 376 points, or 3 per cent, at 12,256, recovering from its drop of about 4 per cent at around 3 p.m. The Standard & Poor's 500 Index was down 46 points, or 3.14 per cent, at 1,403.79. The Nasdaq Composite Index was down 84 points, or 3.37 per cent, at 2,420.22.
The CBOE Volatility Index, known as Wall Street's "fear gauge," surged 70.5 per cent to a session high at 19.01 and then retraced its steps a bit to trade at 18.01, a gain of 61.5 per cent.
Tuesday's sell-off wiped out the Dow's and the S&P 500's gains for the year. The Nasdaq, too, was in the red on a year-to-date basis earlier in the session, but it moved back up into the plus column before the close.
All 30 stocks in the blue-chip Dow average were in the red as the US stock market fell sharply, plummeting in sync with stock indexes around the world.
All three major US stock indexes broke below their 60-day moving averages -- a sign that the momentum that has carried US stocks through a record run higher from July has begun to stall.
Caterpillar Inc., the US heavy equipment maker that does extensive business in China, dropped 3.9 per cent to $64.66 on the New York Stock Exchange.
Caterpillar led the Dow lower, followed by shares of International Business Machines Corp., down 3.4 per cent at $93.66.
China's Shanghai Composite Index dropped almost 9 per cent on fears that the government would crack down on speculation that has driven stock prices there to record highs.
A government report that showed a much bigger-than-expected drop of 7.8 per cent in January's new orders for US-made durable goods added to growth concerns. Durable goods are big-ticket items, including home appliances and computers, intended to last three years or more.
The Philadelphia Stock Exchange's semiconductor index was down 2.8 per cent, its second-biggest drop of the year.
Shares of tech bellwether Cisco Systems Inc. dropped 4.9 per cent to $25.90, weighing on both the Nasdaq and the S&P 500. (Additional reporting by Emily Chasan)
- REUTERS
