The S&P 500 index opened lower and data showing the US services sector expanded in February at its fastest pace in a year did little to stem the decline.
The benchmark S&P 500 is up 8.5 per cent so far this year on investor expectations for a recovery in the US economy, a containment of the Euro zone’s debt crisis and the belief that China will avoid a hard landing in its current economic cycle.
China, the world’s second-largest economy, lowered its 2012 growth target to an eight-year low of 7.5 per cent and made expanding consumer demand its top priority, as Beijing looks to shrink the economy’s reliance on external spending and foreign capital.
“That spooked everybody this morning. It started over in Asia, flowed right to Europe and flowed right over here,” said Ken Polcari, managing director at ICAP Equities in New York.
“The fact is they are guiding a little bit lower to control their inflation. It is not necessarily the end of the world, but it gave people a reason to take some money off the table.”
Materials shares, sensitive to signs of slowing in China’s commodity-hungry economy, dropped and were the biggest drag on Wall Street. The S&P materials sector index fell 1.6 per cent, with Freeport McMoRan Copper & Gold off 3.8 per cent at $40.45.
The Dow Jones industrial average shed 14.76 points, or 0.11 per cent, to 12,962.81 at the close. The Standard & Poor’s 500 Index dipped 5.30 points, or 0.39 per cent, to 1,364.33. The Nasdaq Composite Index lost 25.71 points, or 0.86 per cent, to close at 2,950.48.
During the session, the S&P 500 briefly dipped below its 14-day moving average – a line it has held for the last 50 sessions in an impressive run.
The Nasdaq registered the biggest decline among the three major US stock indexes as Apple dropped as much as 3.5 per cent to a session low at $526 on heavy volume. By the close, it was down 2.2 per cent at $533.16. The company is expected to debut its new iPad this week. The S&P technology sector index lost one per cent.
Alpha Natural Resources shares dropped 6 per cent to $16.35 and Arch Coal slid 5.4 per cent to $12.20 as lower natural gas prices added to growth concern in China.