Bears On The Prowl

An unidentified fan pays her respects during the memorial for Michael Jackson at the Steel Yard Stadium in Gary, Ind., Friday, July 10, 2009. Thousands of Michael Jackson fans flocked Friday to the city where he spent the first 11 years of his life for a memorial celebration for the King of Pop. (AP Photo/John Smierciak)
AP Photo/John Smierciak
Stocks tumbled Tuesday, as investors grew skittish over a series of developments ranging from lower-than-expected manufacturing activity to brokerage downgrades of Citigroup Inc. and Ford Motor Co. The Dow Jones industrials were off more than 350 points.

"We're back to work from a not-so-good August," said Arthur Hogan, chief market analyst at Jefferies & Co. "We came in with a couple of downgrades and just a general sense the economy hasn't picked up the way we would like to see it."

At the close, the Dow Jones Industrial Average was down 355.45, or 4.1 percent, at 8,308.05. It was the largest one-day loss since July 19, when the Dow dropped 390.23, and it came after a 2.4 percent decline last week to break a five-week winning streak.

The broader market also finished sharply lower. The Nasdaq composite index declined 51.00, or 3.9 percent, to 1,263.85, after falling 4.8 percent in the previous week to end three weeks of gains.

The Standard & Poor's 500 index fell 38.39, or 4.2 percent, to 877.68, following a drop of 2.6 percent to end a five-week run higher.

The Institute for Supply Management said its closely watched index of factory business conditions was unchanged in August at 50.5, posting a seventh month of growth but coming in below expectations of a rise to 51.6. The index plunged nearly 6 points in July, raising fears of a double-dip recession.

Any reading above 50 signals growth, while one below 50 indicates contraction in a sector that makes up roughly one-sixth of the U.S. economy.

Analysts say investors were intently watching the release of several economic reports this week, including the ISM report, as they seek evidence that the recovery is continuing now that accounting scandals appear to be fading.

Next week's anniversary of the Sept. 11 attacks and concerns about a possible war with Iraq also are encouraging some nervous investors to lock in profits now, analysts say.

"It's a series of smaller things looming up in the face of 9/11 and the fact that September is historically the worst month of the market. It's getting us off to a lousy beginning," said Tony Cecin, director of institutional trading at US Bancorp Piper Jaffray in Minneapolis.

Last week, the three major indexes fell in thin trading before the Labor Day weekend on a spate of mixed economic reports as well as profit-taking following five straight weeks of gains on Wall Street.

Losers on Tuesday included companies with reduced outlooks or downgraded shares. Intel dropped 81 cents to $15.86 after Lehman Brothers reduced the computer company's third-quarter revenue forecast, citing poor demand. Ford dropped 83 cents to $10.94, and Citigroup declined $3.36 to $29.39, both on ratings downgrades.

IBM fell $3.03 to $72.35, on news that it may have to cut 4,000 jobs once it completes its acquisition of PricewaterhouseCoopers' consulting arm, according to The Wall Street Journal.

On the plus side, UAL rose 7 cents to $2.94 after the company named an aviation newcomer to become the new chief executive of its United Airlines unit, replacing interim CEO Jack Creighton.

Declining issues outnumbered advancers more than 4 to 1 on the New York Stock Exchange. Volume was light.

The Russell 2000 index, which tracks smaller company stocks, fell 11.83, or 3 percent, to 379.13.

Overseas, Japan's Nikkei stock average finished lower 3.2 percent. In Europe, France's CAC-40 fell 4.5 percent, Britain's FTSE 100 declined 3.6 percent, and Germany's DAX index was down 5.8 percent.