Energy companies led a decline in US stocks on Tuesday, as BP's mounting troubles, including US civil and criminal investigations announced late in the session, rattled investors already worrying over a global economic slowdown and its potential impact on companies including Alcoa and Caterpillar.
The concerns ultimately outweighed better-than-expected reports on US construction spending and manufacturing that had boosted stocks earlier in Tuesday's session.
The Dow Jones Industrial Average dropped 112.61 points (1.11%) to 10,024.02. Aluminium giant Alcoa was the measure's worst performer, down 45 cents (3.9%) to $11.19. Materials companies were hit hard by worries about how demand for the sector's products might be hurt after two gauges of Chinese manufacturing showed slowing growth.
Also reigniting worries about the global economy, a European Central Bank report warned that euro-zone banks face EUR195bn of write-downs this year and next.Caterpillar, which has benefited a lot in recent quarters from its overseas exposures, dropped $1.49 (2.5%) to $59.27.
Energy companies were particularly weak as BP's highly anticipated "top-kill" operation failed to stanch the Gulf of Mexico oil spill, and US Attorney General Eric Holder said the US has launched criminal and civil investigations into the spill. Chevron dropped $1.58 (2.1%) to $72.29, and Exxon Mobil declined $1.21 (2%) to $59.25.
Among hard-hit energy stocks that are not part of the Dow, American depositary shares of BP tumbled $6.43 (15%) to $36.52, while Transocean fell $6.73 (12%) to $50.04, Halliburton dropped $3.68 (15%) to $21.15, and Cameron International declined $4.31 (12%) to $31.89.
The Nasdaq Composite dropped 34.71 (1.54%) to 2,222.33. The Standard & Poor's 500 slid 18.70 (1.72%) to 1,070.71, with the energy and materials sectors leading its declines.
Hewlett-Packard slipped 43 cents (0.9%) to $45.58. The personal-computer maker said it plans to spend $1bn to automate data centres and make other operational changes in its IT services business, resulting in the shedding of 9,000 jobs over several years. The company expects the restructuring to generate the same amount in annual savings, or $500m to $700m in net savings after reinvestment.
Covidien PLC agreed to buy vascular device-maker ev3 Inc. for $2.6bn in a move aimed at accessing markets for products that treat problems with blood vessels in the legs and head. Covidien slipped $1.15 (2.7%) to $41.24, while ev3 surged $3.30 (17%) to $22.22.
Tenet Healthcare tumbled $1 (17%) to $4.72, after the hospital company confirmed it is engaged in preliminary discussions regarding a potential acquisition of Healthscope, the second-largest private hospital corporation in Australia. Analysts said the deal could be a balance-sheet stretch for heavily levered Tenet, though it would diversify the company's business.
RadioShack climbed 57 cents (2.8%) to $21.01, following chatter that an initial round of bids for the retailer was completed last week and that executives are giving presentations to bidders this week. A newspaper, citing sources familiar with the matter, said potential participants in the talks include Blackstone Group and Best Buy. Blackstone fell 42 cents (3.9%) to $10.23, while Best Buy slipped $1.53 (3.6%) to $40.72.
Apple rose $3.95 (1.5%) to $260.83. The company said it sold 2m iPads in less than 60 days after the multimedia touch-screen device was introduced. Release of the sales figure followed the iPad's international debut on Friday, when the tech giant introduced the device in nine countries, including France, Germany, the UK and Japan. The release added to brisk sales in the US, where the iPad went on sale in early April.
For Australian ADRs listed on the NYSE, BHP Billiton dropped $2.20 (3.39%) to $62.64, Rio Tinto Plc shed $1.35 (2.93%) to $44.75, ResMed strengthened 41 cents (0.65%) to $63.30, Telstra Corporation lost 18 cents (1.46%) to $12.18, Telecom Corporation of NZ dipped 6 cents (0.94%) to $6.32 and Westpac declined $4.01 (4.08%) to $94.22.
In economic news, The Commerce Department reported that construction spending in the US surprisingly surged in April, as home-buying jumped because of a government tax incentive. While the ISM's May manufacturing index came in at a better-than-expected 59.7.
At 7:45 AM (AEST), the 10-year Treasury note yield was 3.26% and the five year yield was 2.06%.
European shares squeezed higher on Tuesday as investors built positions in the defensive food and utility sectors and found some reassurance in US manufacturing data, even as BP shares plummeted.
The Stoxx Europe 600 index closed up 0.2% at 245.34, helped by gains in stocks like United Utilities and Scottish & Southern Energy.
BP was the top decliner, its shares skidding more than 13% after its latest attempt to stem an oil leak in the Gulf of Mexico failed.
The top European index was lower for most of the day but positive economic data out of the US lifted sentiment late in the session.
The French CAC-40 index fell 0.1% to 3,503.08, the UK FTSE 100 index lost 0.5% to 5,163.30 and the German DAX index gained 0.3% to 5,981.27.
Before the better-than-expected US data, concerns about a slowdown in Chinese factory activity had weighed on stocks.
Miners, which are closely tied to Chinese demand trends were pressured, with BHP Billiton down 2%.
Autos, which rely on consumer spending, were lower, with Fiat shares down 1.9% and Renault down 1.8%.
On Tuesday the seasonally-adjusted unemployment rate across the 16-nation euro zone rose to 10.1% in April from 10% in March, the European Union statistics agency Eurostat reported. Economists had expected the rate to hold steady at 10%.
There were a handful of strong gainers on Tuesday, however, with life insurer Prudential up 6.3%. American International Group said that it wouldn't accept a lowered offer of $30.38bn for its Asian operations, leaving its deal with UK life insurer Prudential on the verge of collapse.
Irish low-cost airline Ryanair advanced 7.5%. Europe's largest no-frills airline declared its first dividend since it went public more than 10 years ago, as lower fuel costs and solid traffic growth helped it return to an annual profit.
Asian stock markets ended lower on signs of a slowdown in the pace of China's economic growth. The Shanghai Composite index closed 0.9% lower after briefly crossing into positive territory before the midday break. Hong Kong's Hang Seng Index finished 1.4% lower and Japan's Nikkei Stock Average lost 0.6%.
New Zealand shares ended slightly weaker in quiet trade due to a lack of leads as key offshore markets were shut for a holiday on Monday. The NZX-50 Index closed down 0.2%, or 6.5 points, at 3,054.76.
Base metals on the London Metal Exchange ended lower, but losses were tempered by strong US construction and manufacturing data. Aluminium fell $30 (1.48%) to $1,995 while copper weakened $65 (0.95%) to $6,795 and nickel dropped $575 (2.73%) to $20,475. Zinc shed $45 (2.34%) to $1,880 and lead lost $50 (2.74%) to $1,775. Comex copper was last quoted at 304.10 US cents per pound.
Gold posted its highest close in two weeks when investors sought the metal for protection against economic uncertainty after a report said European banks face sizeable write-offs. Spot gold was last quoted at $1,224.75. Comex gold futures firmed $11.90 (0.98%) to $1,226.90. Spot silver was last quoted at $18.37.
Crude oil weakened in a volatile session that had crude swinging above $75 and below $72 a barrel as traders faced a mixed economic picture featuring stronger economic data from the US and weaker data from China. West Texas Intermediate was last quoted at US$72.58 per barrel.
At 07:45 a.m. (AET) the US dollar was quoted at 0.8189 euros, 90.95 yen, 1.206 AUD and 68.33 pence.