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US STOCKS-Sell-off leaves S&P in negative terrory for year

Published 06/22/2009, 04:35 PM
Updated 06/22/2009, 04:57 PM
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* S&P falls back into negative territory for year

* Financials, energy and materials lead losses

* Dow off 2.4 pct, S&P off 3.1 pct, Nasdaq off 3.4 pct (Updates to close)

By Caroline Valetkevitch

NEW YORK, June 22 (Reuters) - U.S. stocks suffered their worst one-day loss in two months, dropping the S&P 500 back into negative territory for the year on Monday in a broad-based sell-off, as investors reconsidered the health of the economy.

Shares of economically sensitive sectors such as financials, energy and materials led the S&P 500's decline. A sharp drop in U.S. crude oil futures and other commodities hit shares of companies sensitive to those prices, including Exxon Mobil Corp, which lost 3.1 percent to $68.84.

Analysts said investors were keen to sell shares that led the market up in its rally since early March. Major averages have largely been trading sideways in recent weeks and many investors have speculated that more obstacles were in store for stocks.

"The recovery is likely to be anemic by post-war standards" said Hugh Johnson, chief investment officer of Johnson Illington Advisors, in Albany, New York. "The recovery in the economy and earnings is unlikely to be as strong as the rise in stock prices since early March has implied."

The Dow Jones industrial average dropped 200.72 points, or 2.35 percent, to end at 8,339.01. The Standard & Poor's 500 Index was down 28.19 points, or 3.06 percent, at 893.04. The Nasdaq Composite Index was down 61.28 points, or 3.35 percent, at 1,766.19.

The S&P financial index fell 6.2 percent, while the energy sector dropped 4.6 percent. The financial sector had the biggest gains since the S&P 500 hit a 12-year closing low in early March.

"Some people are skeptical of how the summer is going to play out and may be taking some profits," said John O'Brien, senior vice president at MKM Partners LLC in Cleveland.

Underscoring worries about the economy's outlook, the World Bank said prospects for the global economy remain "unusually uncertain" as it cut 2009 growth forecasts for most economies.

While lower crude oil prices tend to be a positive for the broader stock market, they tend to hurt shares of energy companies by giving investors a reason to unload some holdings in that sector.

Crude oil prices fell $2.62, or almost 4 percent, to settle at $66.93 a barrel. Chevron Corp sank 3.4 percent to $65.76.

Metal prices also slid, dragging down shares of resource companies. Freeport-McMoRan Copper & Gold Inc dropped 11.3 percent to $45.18.

On the Nasdaq, big-cap technology stocks led the decline.

Apple's stock fell 1.5 percent to $137.37 even as it said it had sold more than 1 million of its newest iPhone in the first three days of its launch, beating expectations. The company statement also quoted Chief Executive Steve Jobs, leading at least one analyst to speculate he was back from medical leave.

Adding to a glum economic outlook, Walgreen Co posted weak quarterly results as U.S shoppers focused on buying only necessities. The drugstore chain's stock fell 5.7 percent to $29.64. (Additional reporting by Edward Krudy; Editing by Jan Paschal)

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