U.S. stocks drop on global growth worries

Last Updated Sep 24, 2015 4:32 PM EDT

NEW YORK - U.S. stocks fell on Thursday, but well above session lows, on further evidence that global growth is slowing. Industrial stocks lost ground after Caterpillar cut its revenue forecast, blaming a downturn in the mining industry. Health care stocks also fell sharply.

The Dow Jones industrial average ended down 78 points, or 0.5 percent, to close at 16,201. It had been down 263 points earlier.

The Standard & Poor's 500 index fell six points, or 0.3 percent, finishing at 1,932. The Nasdaq composite declined 18 points, or 0.4 percent, to end at 4,734.

Investors will closely follow a speech on inflation and monetary policy later Thursday by U.S. Federal Reserve Chair Janet Yellen. Markets are looking for clues on the timing of the Fed's first interest rate hike in nearly a decade after it held off raising rates earlier this month. The Fed has rate-setting meetings in October and December.

The Fed kept its benchmark interest rate on hold at close to zero, despite an improving job market and a steady economy. That decision unsettled some investors, because it suggests that the central bank is not confident about the outlook for growth.

"The fear factor was introduced by the Fed last week when they didn't raise rates," said Peter Cardillo, chief market economist at Rockwell Capital. "We're in a very jittery market that's not likely to reverse course until we get some clear indications from the Fed."

Caterpillar (CAT) closed down $4.41, or 6.3 percent, to $65.79 after cutting its 2015 revenue forecast by $1 billion to about $48 billion, and saying sales would fall another 5 percent next year. The company also said it may eliminate as many as 10,000 jobs between now and 2018. The maker of mining and construction equipment is suffering as a global slump in commodity prices hurts mining companies.

While the Fed is considering raising interest rates, other central banks are lowering them. That's another sign that growth outside the U.S. remains weak. Norway's central bank cut its key interest rate to a record low of 0.75 percent and hinted that it could reduce the rate further. Taiwan's central bank also lowered its benchmark rate to 1.75 percent, the first cut since 2009, according to reports.

In Europe on Thursday, Germany's DAX fell 1.9 percent, Britain's FTSE 100 dropped 1.2 percent and France's CAC 40 lost 1.9 percent.

Automakers fell in the wake of Volkswagen's (VLKAY) emissions scandal. After early gains, Volkswagen shares were down 1 percent.

Benchmark U.S. crude rose 43 cents to $44.91 a barrel on the New York Mercantile Exchange. Brent crude, a benchmark for many international oils imported by U.S. refineries, rose 42 cents to $48.17 a barrel.

Bond prices rose, pushing the yield on the 10-year Treasury note down to 2.13 percent from 2.15 percent a day earlier. The dollar slipped to 120.06 yen. The euro ticked higher to $1.1221.

The price of gold rose $22.30 to $1,153.80 an ounce. Silver climbed 34 cents to $15.13 an ounce and copper rose 0.7 cents to $2.30 cents a pound.