NEW YORK — Fears that the economy is stalling sent the Dow Jones industrial average down 280 points, erasing more than a quarter of the stock market’s gains for the year.
Doubts about the economy’s strength that built in May were compounded by were weaker-than-expected reports on manufacturing and jobs. The Institute for Supply Management’s manufacturing index fell to 53.5 in May from 60.4 in April.
A reading of more than 50 indicates the manufacturing industry is growing, but the index had been as high as 61.4 in February. Private employers added just 38,000 jobs in May, down from 177,000 in April, according to payroll processor ADP. Analysts had expected 180,000 new jobs.
“It looks like this recovery has hit its second “soft patch,” which for a recovery that is less than two years old is troubling,” said Paul Ashworth, chief U.S. economist for Capital Economics.
The Dow Jones industrial average dropped 279.65 points, or 2.2 percent, to 12,290.14. It was the biggest point drop since June 4 of last year, and the largest percentage drop since August. The S&P index lost 30.65, or 2.3 percent, to 1,314.55. The Nasdaq composite fell 66.11, or 2.3 percent, to 2,769.19.
The manufacturing and jobs reports, plus a decline in automobile sales in May led several economists to lower their expectations for the year. JP Morgan was among a handful of investment banks that revised down its estimate for GDP growth in the second quarter to 2 percent. The downgrade followed one the bank issued last week. The Dow was down nearly 180 points in midday trading and lost another 100 points after noon as asset management firms sent notes to their clients announcing their economic revisions.
The latest reports on retail sales, first-time applications for unemployment benefits and factory orders will be released today and analysts say any additional signs of economic weakness could push the market even lower.
