Stocks took a tumble Tuesday, falling the most in nearly three months, on renewed concerns about Europe’s debt crisis.
The Dow Jones industrial average was down over 210 points in the final hour of trading and on track for its first triple-digit loss of the year.
Investors are worried that Greece and private bondholders may not meet a looming deadline to complete a debt swap, and caution is growing over the global economic outlook after recent weak data, analysts said.
Hugh Johnson, chief investment officer of Hugh Johnson Advisors, said the market’s pullback Tuesday was “a common sense correction.”
“After you’ve have the strong run up we’ve seen over the past few months, it’s normal to get a pullback,” Johnson said. “There are things to worry about of course, but I don’t think this is more than a correction in an ongoing bull market.”
The worries for Wall Street include a market valuation that has run too high, this Friday’s employment numbers and rising oil prices, Johnson said. And, ironically, growing optimism about the market is another potentially negative indicator, he said.
The situation in Greece is also a worry, Johnson added.
A group representing bondholders warned a default could cause more than 1 trillion euros ($1.3 trillion) of damage to the region. Creditors have until Thursday night to accept a bond swap in which they would lose almost three-quarters of the value of their bonds.
Heightening tensions over Greece come a day after China cut its growth forecast and data showed the European Union is unlikely to avoid a recession. The data was a worry for the market, which has rallied largely on hopes of a strengthening economic picture.
“What is driving the market now is the outlook for economic growth elsewhere and, pretty importantly, the U.S. and China,” said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, N.H.
Banks and materials shares, sensitive to flare-ups in Europe's debt crisis, fell, including Bank of America and aluminum producer Alcoa.
De Gan said the market was struggling at the top end of a S&P 500 trading range, at about 1,370. The index is up 23 percent since reaching closing lows in October. “You’re at the top end of the range and investors will use any excuse to lock in a profit,” said de Gan.
“Markets have been supported over the past few months by the concomitant strengthening in global data and easing in worries about the European crisis,” Goldman Sachs said in a research note. “With the data a bit muddier recently, we are happier on the sidelines for now.”
Greece has no plans to extend the March 8 deadline on its bond swap offer to private creditors, Greek officials said, dismissing market rumors the date may be changed to increase participation in the offer.
European shares hit a 1-week low. Oil pulled back on concerns over global economic growth despite the continued risk to supplies due to Iran's nuclear program. Brent crude fell 1.6 percent, while U.S. crude was off nearly 2 percent.
Shares in Exxon Mobil Corp fell. The Select Sector SPDR energy exchange-traded fund sank.
Copper fell for a third straight day, pulled lower by a stronger dollar and fears of reduced demand from China, the world's biggest consumer of the industrial metal.
Shares in miner Freeport-McMoRan Copper & Gold Inc fell.
Reuters contributed to this report.
