Monday Stocks Lower After Asia Sell-Off

Now at 9,450, down 94 points.

NEW YORK (AP) — Investors were trading cautiously on the last day of August following a big drop in Asian markets.
U.S. stock futures fell after China’s main index plunged 6.7 percent, adding to a nearly 3 percent drop on Friday. The selloff in Chinese shares has been fed by concerns over a tightening in bank lending that could hurt the country’s economy. That in turn has weighed on markets around the globe this month.
Japan’s Nikkei stock average fell 0.4 percent after the country’s opposition party came to power in a landslide victory. European markets were also lower.
There is little economic news scheduled for Monday, but key readings come later this week on manufacturing and employment in August that have the ability to either sustain or upset the market’s massive six-month rally.
After rising more than 45 percent from 12-year lows in March, the Dow Jones industrial average stands less than 500 points away from 10,000. Investors have grown increasingly worried that the market may have gotten too far ahead of the economy. Without evidence of actual economic growth, analysts have warned that the market’s rally could fizzle in the coming weeks, especially as traders head into September, historically a rough month for the stock market.
“There’s enough jitteriness to set the stage for a decline,” said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. “The economic numbers could neutralize the nervousness, could put portfolio managers’ worries to rest.”
Ahead of the market’s open, Dow Jones industrial average futures fell 61, or 0.6 percent, to 9,475. Standard & Poor’s 500 index futures fell 6.80, or 0.7 percent, to 1,020.60, while Nasdaq 100 index futures fell 15, or 0.9 percent, to 1,627.50.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.46 percent from 3.45 percent late Friday.
The dollar was higher against other major currencies, while gold prices fell.
Oil prices lost $1.67 to $71.07 a barrel in electronic trading on the New York Mercantile Exchange.
Germany’s DAX index was down 0.8 percent, while France’s CAC-40 was down 0.7 percent in afternoon trading. The London Stock Exchange was closed for a public holiday.
In corporate news, oilfield services company Baker Hughes Inc. said it will buy BJ Services Co. in a cash-and-stock deal valued at $5.5 billion.
BJ Services shares shot up more than 11 percent in premarket trading, adding $1.74 to $17.17. Baker Hughes shares fell $1.34, or 3.5 percent, to $36.75.
Stocks are on track to have their best August since 2000, with the Dow and the S&P 500 up just over 4 percent for the month as of Friday. Most of the gains were made earlier this month as investors cheered improvements in consumer confidence and an upbeat assessment of the economy from Federal Reserve Chairman Ben Bernanke.
Last week, the major indexes all rose less than 0.5 percent amid light trading and little news.
Trading is expected to be relatively light this week as well, with many traders taking vacations. Light volume can skew the market’s movements. Still, there are a number of important readings on the economy that could sway the market one way or the other.
On Tuesday, the Institute for Supply Management will issue its assessment of the manufacturing industry during August. Economists are expecting ISM’s manufacturing index to come in at 50.1, up from 48.9 in July. A reading above 50 would indicate growth in manufacturing, something that hasn’t happened since January 2008.
The most important piece of data this week is the government’s monthly jobs report on Friday. Economists are expecting another 220,000 jobs were lost, down from 247,000 in July. Last month’s report showed an unexpected dip in the unemployment rate and investors are anxious to see if the rate continues to fall.
As unemployment spiked this year, Americans who lost their jobs or were worried about their job security dramatically cut back on their spending. If fewer jobs are being lost, consumers might start to feel comfortable spending again and help get the economy back on its feet.
August sales reports from major retailers this week will provide the latest insight into consumer spending.

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