U.S. stocks end at lowest level since August plunge

U.S. stocks ended Monday at their lowest levels since late August as concerns about slowing economic growth in China and mixed domestic economic data unnerved investors.

A selloff in biotech stocks added to downbeat sentiment.

“The selling pressure reached a critical mass,” said John Manley, chief equity strategist at Wells Fargo Advantage Funds. “Markets have gotten very touchy and very susceptible to bad news.”

Frank Cappelleri, technical analyst at Instinet, drew parallels between the recent market action and 2011, the last time the stock market experienced an extended period of volatility.

“The movie may not have the same characters this time but the plot continues to unfold as it did in 2011,” Cappelleri said.

The S&P 500 SPX, -2.57% fell 49.57 points, or 2.6%, to close at 1,881.77, sliding below the 1,900 level for the first time since late August, when the market was rocked by China’s move to devalue its currency.

The Dow Jones Industrial Average DJIA, -1.92% sank 312.78 points, or 1.9%, to end at 16,001.89. The Nasdaq Composite COMP, -3.04% dropped 142.53 points, or 3%, to close at 4,543.97, dragged down by the biotech downdraft. The iShares Nasdaq Biotechnology ETF IBB, -6.33% a measure of the biotech’s performance, tumbled 6.3% and registered its worst single-session decline in more than four years.

“Biotech has outperformed for a while so when momentum picks up on the downside, it kind of feeds on itself,” Cappelleri sa.

Monday also marks the first time since Aug. 24, 2011 that the S&P 500, the Dow, the Nasdaq and the Russell 2000 produced a death cross pattern at the same time, and just the 13th time since 1979, according to Sundial Capital.

Slumping commodities prices, including a sharp fall in the price of crude oil CLX5, +0.36% and worries about London mining giant Glencore PLC GLEN, +6.19% which plunged nearly 30% in London, underscored concerns about economic growth outside of the U.S.

“The market is just not in a really good mood right now,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research. Frederick also said the Federal Reserve’s Sept. 17 decision to leave interest rates on hold might have raised doubts about the health of the U.S. economy.

“What investors are doing now is shooting first and asking questions later. And you can’t really blame them right now,” Manley said. Investors are awaiting third-quarter corporate results due in the next few weeks to determine where to place their bets as hand-wringing about the health of China overshadows corporate fundamentals, he said.

The selloff followed another round of weak data from China The country’s industrial profits in August fell 8.8% from a year ago.

Meanwhile, European markets also dropped, with the Stoxx Europe 600 index SXXP, -0.97% closing 2.2% lower, while Asian markets closed mixed.

Data and Fed speakers: A gauge of pending home sales fell to its lowest level in five months, which points to hesitation from buyers amid rising prices, expectations of interest rates being increased and a dearth of homes on the sales block. Pending home sales for August fell 1.4%.

Spending on cars and back-to-school purchases helped bolster purchases at retailers, but the Federal Reserve’s closely watched measure of inflation—the so-called PCE price index—showed little sign of moving toward the central bank’s target 2% level.

In the afternoon, Chicago Fed President Charles Evans, speaking in Milwaukee, said the Fed should be in no hurry to raise interest rates. His remarks come after comments by other Fed officials including Chairwoman Janet Yellen pointed to a rate increase sometime this year. Evans is a voting member of the Fed’s policy-setting committee this year.

Earlier on Monday, Fed Gov. Daniel Tarullo gave a speech on capital regulation across financial intermediaries at a Bank of France conference.

Movers and shakers: Energy Transfer Equity ETE, -12.69% plans to buy, then combine with, Williams Companies WMB, -12.12% after agreeing to a $37.7 billion deal. It comes after Williams and Williams Partners said they were terminating a previously announced merger pact.

Shares of Energy Transfer Equity slumped 13%, while Williams slid 12%.

U.S.-listed shares of Volkswagen AG VLKAY, -6.66% dropped more than 6% after German prosecutors opened a fraud investigation into former CEO Martin Winterkorn. Earlier, Audi said 2.1 million of its vehicles have the emissions-rigging software installed, and the German motor authority gave VW until Monday to come up with a plan to fix affected cars.

S&P 500 component Alcoa Inc. AA, +5.73% bucked the trend, jumping 5.7% after the aluminum-producing giant said it plans to split into two publicly listed companies.

Nike Inc. NKE, -2.29% slipped 2.3% after scoring a record close on Friday.

Comcast Corp. CMCS, +166.98% fell 3.1% after saying it would buy a 51% stake in Universal Studios Japan for $1.5 billion.

U.S.-listed shares of Royal Dutch Shell PLC RDS.B, -3.16% slipped after the oil giant said it would cease exploration activity near Alaska.

Other markets: Metals prices GCZ5, -0.49% dropped across the board, and the dollar DXY, -0.12% traded mixed against other major currencies.

Source: MarketWatch