NEW YORK — Investors are finding out what everybody else already knew: The consumer isn’t going to spend the economy into recovery.
Major U.S. stocks indexes tumbled by the biggest amount in six weeks Monday as investors grew worried that they have been too quick to bet on an economic rebound during the market’s five-month rally. Overseas markets and commodities plunged, and demand for haven investments sent the dollar and Treasury prices shooting higher.
The Dow Jones industrial average skidded 186 points, and all the major indexes fell at least 2 percent. The Nasdaq composite was hardest hit, dropping 2.8 percent, but it also has had the biggest advance as Wall Street rallied this year.
A shudder in China’s main stock market touched off a wave of selling that spread to Europe and then the U.S. A slide in quarterly profits at home-improvement retailer Lowe’s Cos. only added to worries that an improvement in the economy is far off.
Joe Saluzzi, co-head of equity trading at Themis Trading, said the selling was warranted.
“The economics obviously don’t support where we’ve been,” he said.
The Dow fell 186.06, or 2 percent, to 9,135.34, its lowest close since July 29. The Dow had been down almost 205 points at its low of the day. It was the second straight drop in the index and its sixth in the past nine days. Stocks fell Friday after weak reports on consumer sentiment and retail sales.
The broader Standard & Poor’s 500, the basis for many investments such as mutual funds, fell 24.36, or 2.4 percent, to 979.73. Last week, it was up 49.7 percent from a 12-year low of 676 in early March.
It was the biggest slide for the Dow and the S&P 500 since July 2, when a weak employment report fanned worries about the economy and pushed stocks down more than 2.5 percent.
The Nasdaq fell 54.68 to 1,930.84, its biggest drop since June 22.
The slide was steep but felt more controlled than the plunges of the past year because stocks ended off their worst levels and because analysts have been calling for a retreat after the Dow and S&P 500 raced up 15 percent in five weeks.
Worries grew when Lowe’s said consumers are holding off on some purchases. That’s troubling because consumer spending accounts for more than two-thirds of U.S. economic activity.
Some investors used to seeing a quick bounce-back in stocks have underestimated how difficult the recovery could be, even though many analysts have warned that it could take well into 2010 for the economy to regain strength. And some traders seem to be in the same mindset as three years ago, willing to take big chances even when there’s little economic or corporate evidence to justify a huge advance.
