China's banks weigh heavily on Wall St

US STOCKS fell yesterday as investors worried that China&rsquo;s banks could hit the brakes on lending to stem market excesses, a move that could curb the global economic recovery.<br /><br />Concerns about China hurt commodity prices and hit shares in the energy and raw materials sectors, while a steep drop in US durable goods orders in June fed fears of more economic weakness.<br /><br />Oil futures fell $3.88, or 5.8 per cent, to settle at $63.35 per barrel after US government data showed a surprisingly large increase in crude inventories last week. Shares of energy companies also slid, with <strong>Chevron</strong> down 1.8 per cent at $67.12. The S&amp;P energy index dropped 2.1 per cent.<br /><br />China&rsquo;s two biggest state-owned commercial banks have put a lid on their 2009 lending targets, a move that will significantly slow overall Chinese credit growth in the year&rsquo;s second half.<br /><br />Further weighing down stocks, yields of shorter-dated US Treasuries briefly hit five-week highs while their prices plunged after the week&rsquo;s second poor auction, increasing concern of a possible spike in borrowing costs.<br /><br />The Dow Jones industrial average dropped 26 points, or 0.29 per cent, to close at 9,070.72. The Standard &amp; Poor&rsquo;s 500 Index fell 4.47 points, or 0.46 per cent, to 975.15. The Nasdaq Composite Index lost 7.75 points, or 0.39 per cent, to 1,967.76.<br /><br />Each of the three major US stock indexes gained 11 per cent in the previous two weeks as upbeat corporate earnings gave a second wind to a rally that drove the S&amp;P 500 up 40 per cent from a 12-year low hit in early March.<br /><br />The S&amp;P 500&rsquo;s only positive sectors were telecommunication services, healthcare and consumer staples, the ones seen as able to better weather economic downturns.<br /><br /><strong>Caterpillar</strong> shed 2.5 per cent to $41.83 and was a top drag on the Dow industrials.<br /><br />Among the Nasdaq&rsquo;s major decliners, <strong>Yahoo </strong>shares tumbled after the internet media company announced an advertising deal with<strong> Microsoft</strong>.<br /><br />Shares of <strong>Google</strong>, a direct competitor of the new partnership, fell 0.8 percent to $436.24.<br /><br />Decliners outnumbered advancers on the NYSE by a ratio of about 3 to 2. On the Nasdaq, eight stocks fell for every five that rose.