The broad S&P 500 index fell 6.3 per cent in May, its largest percentage drop since September. The Dow’s 6.2 per cent drop and Nasdaq’s 7.2 per cent loss are their largest monthly declines in two years.
Spain was at the centre of the latest European developments as markets judged Madrid’s government would sooner or later have to ask for outside help for its banks. A report, later denied, of possible plans to assist Spain with its troubled banks helped Wall Street nearly erase losses of 1 per cent in the afternoon.
Market participants cited month-end rebalancing as also supporting stocks due to money managers buying more shares to make up for the declining value of equities during May.
However, the continuing worry over Europe and a batch of disappointing US economic figures weighed on the market. Jobless claims rose for the seventh week in eight, putting investors on edge before Friday’s US monthly payrolls report.
“Europe is the main issue, no question about it, but you have a supporting cast from the US data,” said Paul Zemsky, head of asset allocation at ING Investment Management in New York.
The Dow Jones industrial average dropped 26.41 points, or 0.21 per cent, to 12,393.45. The S&P 500 Index fell 2.99 points, or 0.23 per cent, to 1,310.33. The Nasdaq Composite lost 10.02 points, or 0.35 per cent, to 2,827.34.
Shares of US Steel dropped 5.1 per cent to $20.30 and Cliffs Natural Resources fell 6.1 per cent to $47.78 as energy and materials company shares led declines on the S&P 500.
Commodity prices fell with the euro at 23-month lows against the US dollar. The greenback weakened sharply versus the yen, a sign that investors were moving money into perceived safe havens.
Private payroll growth accelerated only slightly last month and claims for jobless benefits rose last week, suggesting the labor market recovery was stalling.
A disappointing number in today’s report would further dampen market sentiment, but it could also bring back talk of further stimulus by the US Federal Reserve.
Shares of TJX Cos rose 2.7 per cent to $42.46 after the low-price retailer was among those to report sales at stores open at least a year that beat Wall Street forecasts.
Ciena climbed 14.1 per cent to $13.55 after the network equipment company posted a surprise second-quarter adjusted profit.
Joy Global slumped 5.1 per cent to $55.86 after the mining equipment maker cut forecasts.
Facebook shares hit a fresh intraday low of $26.83 before bouncing back to close up 5 per cent at $29.60.