Broad-based selling across the globe spilled into the U.S. stock market Monday, with energy and materials sectors in the lead due to a sharp drop in commodities prices.

The Dow Jones Industrial Average recently was down 165 points, or 1.9%, at 8375, adding to last week's 260-point slide. Its energy components Exxon Mobil and Chevron fell more than 2% each, while Alcoa slid 7.8%. The S&P 500 slid 24, or 2.6%, to 897.
Crude oil futures were particularly under pressure. The front-month July contract closed down $2.62 at $66.93 a barrel on the New York Mercantile Exchange.
Crude and other commodities have been key vehicles for investors to bet on a recovery in the global economy. That dynamic worked in favor of commodities and the shares of raw-materials producers during the stock market's spring rally, but sentiment on Wall Street has recently turned gloomier.
“This market needed to pull back a little bit, considering that the demand just isn't there,” said energy broker Jeff Grossman of BRG Brokerage in New York. “Until further notice, we're in an environment where you can sell into rallies.” Other global names and sectors sensitive to hopes for a recovery suffered as well. Big decliners among blue chips included General Electric, off 4%; and Caterpillar, off 3.6%.
Financials also were under pressure, with Bank of America down 7.3% and American Express off 4.5%. Large banks helped lead major indexes off their March lows, due in part to a flood of buying from retail investors, but have faced resistance in the past few weeks following the White House release of its plan to regulate the financial sector.
“Early on, you saw money really coming into the market, but lately, there has been a lot less coming in,” said Jim Dunigan, managing executive of investments for PNC Wealth Management.
With the latest declines, the Dow and S&P 500 are on track for their lowest close in a month. Traders said the market has been under increasing pressure lately as key technical levels have been breached, with the S&P falling below the 925 level and then 900.
The broad index has also now fallen below its 200-day moving average, a key barometer for many traders who use so-called “black boxes,” or computerized trading systems that execute orders automatically based on chart patterns.
From an economic standpoint, investors' recession fears were heightened on Monday by a new World Bank forecast that the global economy will shrink by 2.9% this year, worse than the organization's previous call for a 1.7% contraction. The report stoked selling globally, with most major benchmarks in Europe down more than 2%.
In Canada, the S&P/TSX Composite Index was down more than 3% as metals and energy stocks sank.
Domestically, the Nasdaq Composite Index fell 2.9%, while the Russell 2000 index of small caps declined 3.1%.
Traders said Monday's move has also been exacerbated by light volume, which allows a relative handful of participants to have an outsized influence on major indexes. About 854 million shares had changed hands on the New York Stock Exchange's floor as of 03:30 P.M. EDT.
Bob Bright, a partner at the proprietary firm Bright Trading in Chicago, said its traders have largely remained on the sidelines Monday. For his own part, Bright said he used last week's expiration of major futures and options contracts as an opportunity to finish unwinding a $450 million portfolio shared with several members of his family, who asked him to liquidate it last October, when the credit crisis was in full bloom on Wall Street.
He suspects, however, that other money managers and their clients are still going through a similar process, which may lead to renewed weakness in the market through the spring.
“It took me eight months to do it, but that's the sort of thing you have to do in this environment where everyone's deleveraging,” said Bright. “At this point, who would buy? What's the catalyst or the reason out there to do that?”
Investors will be on guard this week against the possibility of volatility following the Treasury's scheduled sale of $104 billion in paper to finance the government's stimulus and bailout programs. Recent auctions have fueled talk that government spending could fuel a sudden wave of inflation, though those concerns waned last week as investors focused instead on the potential for a prolonged recession that would hold prices and employment down.
The ability of European governments to raise money has also been tested lately. In a note to clients on Monday, Brown Brothers Harriman strategist Marc Chandler noted that France, Belgium, and Ireland plan to sell bonds this week using private banks as underwriters. Those countries are eschewing open auctions - their usual practice - in hopes of maintaining a more orderly market in case there's little demand among investors for the paper, Chandler wrote. Treasury prices rose in recent trading. The two-year note was up to yield 1.13%. The 10-year note was yielding 3.7%
(Source: Wall Street Journal)