U.S. stocks declined on Monday, with equities positioned for their longest stretch of losses since January, as Wall Street reacted to the largest drop in eight years for Chinese shares on worries about the country's growth.
"The Chinese market is down 8.5 percent, so the natural reaction is to assume that the Chinese economy is in terrible shape," Art Hogan, chief market strategist at Wunderlich Securities, told CBS MoneyWatch. "But the Shanghai index was up 150 percent in 12 months and no point in time did we think the Chinese economy was up 150 percent."
"We're pricing in no growth, or 2 percent," when in reality China is going from 8 or 9 percent to 6 or 7 percent GDP growth, Hogan said.
The S&P 500 (spx) shed 12 points, or 0.6 percent, to 2,068, with the material and energy sectors leading the declines that included nine of 10 industry groups. Utilities -- viewed as a defensive play -- was the only sector to advance.
The Nasdaq Composite (comp) fell 49 points, or 1 percent, to 5,040.
"Overnight there was talk that China was backing off from supporting stocks maybe in a test to see how markets would settle out without them. I applaud this but short term pain is the obvious result and inevitable hangover," Peter Boockvar, chief market analyst at the Lindsey Group, emailed, noting the 8.5 percent drop in the Shanghai index.
"From an economic standpoint, China has been slowing for years and most commodity prices have been selling off since 2011 so what we are now witnessing is not new and instead is just a continuation of a multi-year trend."
In a statement Monday, a spokesman for China Securities Regulatory Commission said China Securities Finance Corp., a state-backed entity that offers margin financing and liquidity, has not taken away its backing for equities. The commission will "continue efforts to stabilize market and investor sentiment, and prevent systemic risk," the spokesman said.
Domestically, a measure of U.S. business investment plans bounced back last month, with the Commerce Department reporting non-defense capital goods orders excluding aircraft rising 0.9 percent after a 0.4 percent decline in May.
Second-quarter earnings have been mixed.
On Tuesday, the Federal Reserve begins a two-day policy meeting, its final one before September, which is still viewed as the first possible month for an interest-rate hike.