NEW YORK — Investors yanked money out of stocks Thursday after new reports from the U.S. and China pointed to a sharp slowdown in manufacturing.
The Dow Jones industrial plunged 251 points, the second-biggest drop this year.
Losses in energy and materials companies led a widespread rout on the stock market. The Dow started sinking after 10 a.m., when the Philadelphia branch of the Federal Reserve reported a sharp contraction in manufacturing in the Northeast. The losses accelerated throughout the day.
“The news has been horrible out there,” said Uri Landesman, president of Platinum Partners. “The U.S. economy is slowing down. And China’s growth is definitely under question.”
The bad news kept piling up as the day went on. Mining and other companies that make basic materials fell hard after prices for commodities such as copper and oil dropped. Goldman Sachs analysts advised their clients to bet stocks would fall, and speculation swirled that Moody’s would cut the credit ratings of 17 banks.
The Dow lost 250.82 points to close at 12,573.57, a drop of 2 percent. Alcoa lost 37 cents to $8.55. A new report that manufacturing slowed in China was troubling since that country’s economy has helped drive global economic growth over the past four years. China is a major importer of copper and other basic materials.
The Standard & Poor’s 500 index lost 30.18 points to 1,325.51, a decline of 2.2 percent. The Nasdaq composite fell 71.36 points, or 2.4 percent, to 2,859.09. All three indexes lost their gains for the week.
The late-morning blows to investor confidence were just the latest reasons for people to pull money of out stocks. Earlier Thursday, the Labor Department reported the four-week average of applications for unemployment benefits, a figure closely watched by economists, jumped to the highest level since September. The National Association of Realtors also reported sales of previously occupied homes dropped 1.5 percent in May.
All this came a day after the Federal Reserve slashed its estimates for U.S. economic growth and said it would extend a bond-buying program through the end of the year, disappointing investors who had hoped for bolder steps from the central bank to get the economy going again.
A manufacturing survey for countries that use the euro also showed a contraction. The reports out of China and Europe helped sink commodity prices. Copper and platinum fell 2 percent. Benchmark U.S. crude hit its lowest level in almost nine months, $78.20 a barrel. That’s down almost 30 percent from a peak in February.
The Philadelphia Fed index pushed Treasury prices up and yields down as traders shifted money into the their favorite hiding spot. The yield on the 10-year note slipped to 1.61 percent, down from 1.63 percent late Wednesday.
