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 safe-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 index was hardest hit, dropping 2.8 percent, but it also 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.
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Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said the selling was warranted.
"The economics obviously don't support where we've been," he said.
The slide was steep but felt more controlled than the plunges of the past year because stocks ended off of their worst levels and because analysts have been calling for a retreat after the Dow and Standard & Poor's 500 index raced up 15 percent in only five weeks.
The Shanghai stock market tumbled 5.8 percent Monday as investors worried that the Chinese government would tighten bank lending policies. Investors outside China have been hoping that strengthening there would spill over to other economies.
Worries grew when Lowe's said consumers are putting off big 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.