NEW YORK — Wall Street caved in to its economic anxieties and closed lower Monday, giving up an early rally over a stimulus package in China and refocusing on the acute pullback in spending that is pummeling U.S. companies.
Stocks got only a short-lived boost from China’s $586 billion plan to boost its economy through a mix of spending, subsidies, looser credit policies and tax cuts. The package could benefit multinational companies with business in China such as General Electric and Caterpillar.
But Wall Street’s optimism quickly waned, as it has tended to do since the mid-September downfall of Lehman Brothers and government takeover of troubled insurance giant American International Group.
Market participants realized that while China’s stimulus is a positive sign that governments around the world are working to fix the global economy, the stimulus itself likely will have only a limited effect in the United States.
There was little news Monday to placate investors concerned about the health of corporate America. AIG got more money from the U.S. government, but the nation’s struggling automakers have yet to hear whether they, too, will get federal aid. And electronics retailer Circuit City filed for bankruptcy protection.
With few signs of recovery in the economy, investors aren’t confident enough to make big bets on stocks, although they look cheap; the major indexes are down about 40 percent from their October 2007 peaks.
Still, while trading was uneven, it was also fairly orderly, especially in the last hour, the time when Wall Street has seen some of its most intense volatility. And it was just the sixth session in eight weeks that the Dow Jones industrials did not close with a triple-digit move.
The Dow fell 73.27, 0.82 percent, to 8,870.54, after rising by 215 points in early trading and tumbling by as many as 183.
Broader indexes also ended lower. The Standard & Poor’s 500 index fell 11.78, 1.27 percent, to 919.21, and the Nasdaq composite index fell 30.66, 1.86 percent, to 1,616.74.
Anthony Conroy, managing director and head trader for BNY ConvergEx Group, said, “We’re in that bottoming process” but that trading is apt to be volatile at least until Nov. 15 — the last day that hedge funds and mutual funds can get calls for redemptions for 2008. Redemptions are when investors ask for their money back.
