FOX Business: Capitalism Lives Here

U.S. equity markets took a beating on Thursday, with the S&P 500 taking its worst fall since February 3, as traders fretted about the Chinese economy and financial system.

Today's Markets

The Dow Jones Industrial Average fell 231 points, or 1.4%, to 16109, the S&P 500 declined 21.9 points, or 1.2%, to 1846 and the Nasdaq Composite dipped 62.9 points, or 1.5%, to 4260.

A report from Reuters suggesting China's banks planned to cut loans to certain industries by up to 20% concerned traders who had already been concerned about the world's No. 2 economy. 

“It’s as if traders think some big defaults (in China) are imminent," said Michael Block, chief strategist at Rhino Trading Partners. "(Chinese Premier) Li spoke out overnight about not allowing systemic risk, which should have been taken well except now everyone waiting for the big default shoe to drop." 

At the same time, mounting tension between Ukraine and Russia ahead of a contested referendum of the future of Ukraine's Crimea region weighed on sentiment. 

The VIX, seen as Wall Street's fear gauge, shot up by 12.1% on the day. Meanwhile, the yield on the 10-year U.S. Treasury bond fell 0.07 percentage point to 2.656% as traders bid-up the safe-haven asset. The S&P is down 0.1% for the year, while the Dow is off 2.8%.

On the economic front, the Commerce Department reported retail sales rose 0.3% in February, slightly higher than the 0.2% pick-up economists expected. Excluding the auto segment, sales rose 0.3%, verses expectations of a 0.2% gain.Retail data have been particularly affected by harsh weather that swept across the country in January and February. 

Meanwhile, the Labor Department said the number of Americans filing for first-time unemployment benefits fell last week to 315,000 from an upwardly revised 324,000 the week prior. Wall Street was looking for claims to rise to 330,000 from an initially reported 323,000.

Another report from Labor showed U.S. import prices rose 0.9% in February, more than the 0.4% gain Wall Street expected. Export prices, meanwhile, rose 0.6%, also higher than the 0.2% pick-up analysts were looking for. Both gains were the largest increases in a year.

Chinese industrial production climbed at a lower-than-expected 8.6% rate in January through February. Other metrics, such as disappointing retail sales, have sparked concerns about whether the pace at growth in the world's second-biggest economy will sharply slow down. 

"The drop-off in industrial production growth, fixed asset investment, retail sales and electricity production confirmed to our economists’ the weakening of China’s economic momentum, while the relatively modest slowing in property investment growth ... bolstered their belief that the property sector poses the single largest risk to China’s outlook," analysts at Nomura wrote to clients.

Commodity markets stabilized. U.S. crude oil futures rose 29 cents, or 0.31%, to $98.28 a barrel. Wholesale New York Harbor gasoline dipped 0.08% to $2.954 a gallon. Gold fell $1.70, or 0.12%, to $1,369 a troy ounce. 

In corporate news, William Sonoma (WSM) posted better-than-expected quarterly profits.

 

Follow Adam Samson on Twitter @adamsamson.