Stocks, oil, gold drop on growth worries

NEW YORK: Global stocks fell more than 1 percent and Brent crude hit its lowest since December 2010 yesterday, following data showing Chinese, European and US manufacturing activity had slowed further, just a day after the Federal Reserve extended its monetary stimulus program.
US stocks added to losses after Goldman Sachs recommended shorting the benchmark S&P 500 index, with a target level of 1,285. It was the worst day for all three major US indexes since June 1.
Gold fell and was on track for its biggest decline in more than three months on global economic worries, while the US dollar rose against the euro and yen as the Fed's move disappointed investors who had hoped for a more aggressive policy.
Business activity across the euro zone shrank for a fifth straight month in June, and Chinese manufacturing contracted, while weaker overseas demand slowed US factory growth, surveys showed on Thursday.
The data clouded the outlook for the world economy and compounded fears that Europe's debt crisis, and slower growth in the United States and Asia, would hurt economies worldwide.
"The genesis is Europe and it's starting to flow through everything now. Business has slowed down," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
The Dow Jones Industrial Average was down 185.16 points, or 1.44 percent, at 12,639.23. The Standard & Poor's 500 Index was down 22.60 points, or 1.67 percent, at 1,333.09. The Nasdaq Composite Index was down 54.48 points, or 1.86 percent, at 2,875.97. MSCI's global equity index declined 1.6 percent, and European shares ended down 0.5 percent.
On Wednesday, the Fed chose to extend its bond-buying program, dubbed "Operation Twist," rather than implement more quantitative easing as some had hoped. The US central bank made its decision after lowering forecasts for growth and employment in the world's largest economy in 2012 and 2013. It said it would consider more stimulus measures if the situation worsened.
In Europe, preliminary manufacturing and service sector data across the 17-nation euro area showed the downturn in the region was becoming entrenched as falling new orders and rising unemployment hit business confidence. The survey data showed that Germany's private sector shrank in June for the second month running, with manufacturing activity hitting a three-year low.
A similar survey of private sector activity in China, compiled by HSBC, found its factory sector had shrunk for an eighth straight month in June, on weaker demand for exports.
Economic growth in the world's most populous nation is widely expected to have slowed for a sixth straight quarter in April through June as the country feels the impact of the euro area debt crisis and property controls weigh on domestic demand.
In US stocks, energy and materials shares led declines, with the S&P energy sector index down 3.2 percent and the materials index down 2.7 percent.
In the oil market, Brent crude fell $2.85 from Wednesday's settlement to $89.84 a barrel, and hit its lowest level since December 2010. US crude traded down $2.95 to $78.50.
The dollar index, a measure of the greenback's performance against a basket of currencies, rose 0.7 percent to 82.154.
Spot gold was down 2 percent at $1,574.40 an ounce.
"The manufacturing data was deflationary. Gold selling accelerated following yesterday's Fed announcement, which was modestly disappointing for those traders who had bought gold in anticipation of more help from the Fed," said Mark Luschini, chief investment strategist of Janney Montgomery Scott, a broker-dealer with $54 billion in assets.
Spanish government bond yields fell sharply as Madrid tapped the markets with a sale of medium-term debt, although at an increased cost.