U.S. stocks kicked off June with a sharp loss after disappointing readings on private-sector job growth and manufacturing activity prompted increasing concerns about a slowing economy.
The Dow Jones Industrial Average recently was trading near session lows, down 208 points, or 1.7%, to 12362. Bank of America led the blue-chip index lower, falling 3.8%, while Alcoa dropped 3.4% and Caterpillar declined 3.2%.
The last time the Dow dropped more than 200 points on a closing basis was March 16.
The Standard & Poor's 500-stock index fell 24 points, or 1.8%, to 1321, dragged down by the financial and material sectors. The Nasdaq Composite fell 44 points, or 1.5%, to 2792.
"There's a very large population of portfolio managers who are nervous," said Fred Fraenkel, chairman of investment policy at Beacon Trust Company. "They're invested, but they're nervous and scared the same way they were scared this time last year about a double dip."
Financials were the S&P 500's biggest declining sector Wednesday, dropping 2.7%. The weak private-sector jobs report points to a major obstacle to recovery for banks, given that unemployment is tied to delinquencies on mortgages and credit cards, as well as weak consumer lending.
Market participants say renewed concerns about Europe's debt-laden countries and the global economy dipping back into recession are some of the causes behind the big drop in financial stocks.
"The thought process behind Greece and a potential recession lead people to worry whether the banks truly have recapitalized enough to take another hit in case the economy goes down," Frankel said.
Wednesday's losses followed a slew of data pointing to a weakening economy. The U.S. manufacturing sector slowed sharply in May, according to the Institute for Supply Management. Additionally, private-sector jobs in the U.S. rose by just 38,000 last month, according to Automatic Data Processing Inc. and consultancy Macroeconomic Advisers. The figure came in well below the gain of 190,000 economists had anticipated.
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