NEW YORK – Concerns about China’s economy and a warning about the U.S. credit rating hit stocks.
Credit ratings agency Moody’s said Monday that debt loads are stretched in the U.S. and Britain. The countries carry the top “AAA” rating. And a drop in the rating would make it more expensive for the government to borrow money.
Investors also looked to China, where stocks fell after the country’s annual policy meeting ended without new measures to help increase consumer spending. There are concerns that China’s efforts to slow its economy and curb inflation will hurt a global recovery.
“The market is cranking along here and any excuse for some profit-taking — and certainly China is a good one — is going to result in a little bit of softness,” said Phil Orlando, chief equity market strategist at Federated Investors in New York.
Meanwhile, a report showed manufacturing activity in New York has slowed slightly in March. The Empire State manufacturing index fell to 22.9 from 24.9 in February. Economists had predicted a drop to 21.5.
A separate report found that industrial production unexpectedly rose in February. The Federal Reserve said output from the nation’s factories, mines and utilities rose 0.1 percent, while economists polled by Thomson Reuters had forecast a drop in activity. It was the eighth consecutive month of growth, showing the industry is recovering from the recession.
The drop in stocks comes as investors await the Fed’s meeting on interest-rate policy on Tuesday. While it is unlikely to raise a key interest rate from historic lows, traders will be looking for clues in the Fed’s statement about when it might raise rates. Investors have been factoring in an eventual rate hike, but any signs that the move will be made sooner rather than later is likely to hurt stocks at first.
In midday trading, the Dow Jones industrial average fell 39.22, or 0.4 percent, to 10,585.47. The Standard & Poor’s 500 index dropped 7.34, or 0.6 percent, to 1,142.65, while the Nasdaq composite index fell 20.26, or 0.9 percent, to 2,347.40.
Stocks ended mixed Friday but posted strong gains for the week.
Bond prices mostly fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.73 percent from 3.70 percent late Friday.
The dollar rose against most other major currencies. Gold prices also rose.
Crude oil fell $1.84 to $79.41 per barrel on the New York Mercantile Exchange.
Beyond economic news, investors are awaiting more details on a proposed overhaul of financial regulation. Sen. Chris Dodd, a Democrat from Connecticut and chairman of the Senate Banking Committee, is expected to present a bill Monday to remake bank rules. The plan would give the Fed the power to regulate the biggest financial firms and remove the central bank’s oversight of smaller bank holding companies.
More than two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 347.8 million shares, compared with 425.8 million shares traded at the same point Friday.
The Russell 2000 index of smaller companies fell 6.87, or 1 percent, to 699.72.
In afternoon trading, Britain’s FTSE 100 fell 0.6 percent, Germany’s DAX index fell 0.7 percent, and France‘s CAC-40 lost 0.9 percent. Earlier, Japan’s Nikkei stock average rose less than 0.1 percent.
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