US stocks fall on worrisome signs from China

DANIEL WAGNER AP Business Writer Published:

U.S. stocks followed world markets lower Tuesday after worrisome economic data out of China, whose blistering economy helped sustain global growth during the economic downturn.

Asian stocks fell sharply after a report that home prices dropped in 45 Chinese cities last month, a result of government policies designed to reduce property speculation. Mining giant BHP Billiton said it expects weakening Chinese demand for iron ore used in steelmaking.

On Wall Street, the Dow Jones industrial average and the Standard & Poor's 500 were both headed for their biggest losses in two weeks.

"If there were skeptics out there that the market might have gotten a little ahead of itself, this was all the news they needed," said Brian Gendreau, market strategist at Cetera Financial Group, a brokerage.

Gendreau said traders are increasingly concerned about slower growth in emerging markets -- not just China, but India and Brazil as well.

The Dow was down 78 points at 13,161 just after noon EDT. The S&P 500 was down nine at 1,401. The Nasdaq composite index dropped 25 points to 3,054.

Caterpillar, the maker of heavy equipment, led the Dow lower, sliding 2.5 percent after it said global sales are growing more slowly. Bank of America, by far the most heavily traded stock, led the Dow higher with a 2.1 percent gain.

Mining companies, which have increasingly relied on rising demand from the developing world, plunged after BHP Billiton's grim report on Chinese demand. Cliffs Natural Resources Inc. dropped 3 percent, Peabody Energy Corp. 5 percent and U.S. Steel 2 percent.

The losses were broad, hitting eight of the S&P 500's 10 industry groups. The rising groups were utilities and financials, which tend to offer safe, modest returns even when the economy is sluggish.

U.S. Treasury debt declined after a rally-busting overnight gain. Stronger demand had pushed the yield on the 10-year Treasury note down as low as 2.33 percent after nine straight sessions of rising yields. By midday, the 10-year yield had recovered to 2.36 percent, unchanged from late Monday.

Earlier Tuesday, the U.S. Commerce Department released a mixed report on the housing market. Builders broke ground on fewer homes in February, though they obtained more permits to build homes later in the year.

Gendreau said the report's impact on trading was mild because most housing data in recent months have signaled a revival for the sector.

The price of oil fell 2 percent after Saudi Arabia said it is ready to meet any shortfalls -- real or perceived -- in global supplies. New York crude was down $2.14 at $106.41.

Oil prices have been spiking in part because of fears that a standoff over Iran's nuclear program could reduce oil production in the Middle East.

European indexes fell sharply. Germany's DAX lost 1.1 percent, France's CAC-40 1 percent and Britain's FTSE 1.1 percent.

Among the companies making big moves on Tuesday:

-- Jeweler Tiffany & Co. jumped 7 percent after the company said it expects profits and revenue to rise in 2012, despite weaker earnings in the fourth quarter.

-- Adobe Systems Inc. fell 4 percent after the software maker said that its fiscal first-quarter profit fell sharply as operating costs rose.

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Daniel Wagner can be reached at www.twitter.com/wagnerreports.