With light trading expected to be the norm this week ahead of summer’s unofficial Memorial Day weekend beginning, volatility shouldn’t be a surprise to investors.
But traders probably weren’t expecting stocks to fall to their lowest level in more than a month.
On Monday, the Dow Jones Industrial Average tumbled 131 points, or 1.1% to 12,381, the Nasdaq fell 44 points, or 1.6%, to 2759, and the S&P 500 dropped 16 points, or 1.2%, to 1317.
The S&P’s decline marks its lowest closing level since April 20.
In a way, U.S. investors were fortunate, as stocks in Europe and Asia took even heavier hits, as a combination of sovereign debt concerns and data suggesting economic slowdowns on both continents were in the early stages.
Stocks in Shanghai fell nearly 3%, while U.K.’s FTSE dropped 1.6%.
That two-pronged concern has been gathering steam to cause and/or coincide with deflating commodity prices — generally, good news unless it means economic doldrums figure to take hold for the foreseeable future.
Crude oil fell 2.4% to drop below $98 a barrel, and it has now spent more time under $100 than it has above it during the past week and a half.
Silver stocks sold off, but gold rallied, as its safe-haven status trumped any concerns about its speculative nature.
As with most down days in equities that has coincided with a commodity selloff, small-caps suffered the worst, as investors begin to increasingly give up on getting big runs out of smaller energy and materials stocks.
To wit, forestry and paper-products stocks were among the worst performers on Monday: International Paper (NYSE:IP), for example, fell nearly 4%.
Travel and tourism, which as a group had jumped about 20% over a two-month period from March to early May, have now given back nearly 7% of that run, and took another hit on Monday. Priceline.com (NASDAQ:PCLN) fell 3.5%, while Orbitz (NYSE:OWW) dropped 3.1%.
Finally, since we did note on Friday the ominous sign of large-cap financial stocks — as measured by the Financial Select Sector SPDR (NYSE:XLF) exchange-traded fund — closing to their lowest level since Dec. 20, one can generally assume it’s less than bullish that the sector is now essentially unchanged since the fall of 2009.
