Stock selloff deepens
Dow tumbles 150, Nasdaq slumps as investors eye selloff in China, thwarted attack on Cheney, drop in durable goods orders.
NEW YORK (CNNMoney.com) -- The stock selloff worsened near midday Tuesday as reports of slumping stocks in China and Europe and a steep decline in durable goods orders raised worries that the recent rally may be tapped out.
News that Vice President Dick Cheney was the apparent target in a Taliban suicide bombing attack in Afghanistan added to the morning concerns.
The Dow Jones industrial average (down 199.48 to 12,432.78, Charts) sank about 1 percent roughly two hours into the session, as did the broader S&P 500 (down 26.77 to 1,422.60, Charts) index. Both blue-chip averages have fallen for the last four sessions.
The Nasdaq (down 60.84 to 2,443.68, Charts) composite slumped 1.5 percent after having slid for the last two sessions.
Treasury bonds rallied as investors sought a safe place to park their money while the dollar fell.
Chinese stocks slumped 9 percent Tuesday - the worst one-day selloff in a decade - on concerns that the government would interfere to cool the speculation that drove the Shanghai market up 130 percent last year. (Full story).
The slump in world markets exacerbated concerns that Wall Street is due for a selloff after a nearly eight-month rally that has sent the Dow industrials to record highs and the Nasdaq and S&P 500 to more than 6-year highs.
"The selloff certainly demonstrates somewhat starkly the inter-connectedness of stock markets around the world," said Hugh Johnson, chief strategist at ThomasLloyd Global Asset Management.
"Markets can decline in one seemingly isolated part of the world and that decline can be transmitted to other parts of the world through the psychology," he said.
In the longer term, he said, the selling will ease as the shock wears off. Yet markets will "continue to be vulnerable to big decisions by big policy-makers in big places like China," he added.
A morning report in the United States showing a steeper-than-expected decline in durable goods orders in January added to concerns about slowing economic growth.
Slowing growth ultimately drags on corporate profits, making stocks more expensive relative to earnings. For more on the day's economic news, click here.
The drop in durables dragged on blue chips such as Dow components Alcoa (down $1.06 to $34.30, Charts), Caterpillar (down $2.06 to $65.20, Charts), General Motors (down $1.40 to $32.57, Charts) and Boeing (down $1.29 to $87.64, Charts).
Market breadth was negative On the New York Stock Exchange, decliners trounced advancers by more than five to one on volume of 790 million shares. On the Nasdaq, losers beat winners by almost six to one on volume of 1.06 billion shares.
Also hurting stocks Tuesday: news of a suicide bombing attack at the entrance to the main U.S. military base in Afghanistan during a visit by Dick Cheney. The attack killed at least 23 people. (Full story).
In addition to durable goods orders, the morning brought the latest read on the housing market.
Existing home sales grew at a faster-than-expected pace in January, in a report that also showed the pace of sales dropped from a year ago. The median price of a home sold in January was down versus a year ago. (Full story).
Another report showed that consumer confidence saw a surprise rise in February versus forecasts for a drop.
Investors were also still digesting Monday reports that former Federal Reserve Chairman Alan Greenspan says the economy could fall into a recession by the end of 2007. (Full story).
Tuesday kicks off a busy week for economic news, with reports due later in the week on fourth-quarter gross domestic product growth, new home sales, personal income and spending and the manufacturing sector.
Treasury prices rallied as investors sought safety, lowering the yield on the benchmark 10-year note to 4.59 percent from 4.62 percent late Monday. Treasury prices and yields move in opposite directions.
In currency trading, the dollar fell versus the euro and the yen following the durable goods orders report.
U.S. light crude oil for April delivery rose 70 cents to $62.09 a barrel on the New York Mercantile Exchange, erasing morning losses. The price of oil rose for the last four sessions.
COMEX gold for April delivery fell $10.50 to $69.30 an ounce.