Trader David O''Day, left, works on the floor of the New York Stock Exchange, Friday, June 21, 2013. Global stock markets reeled Monday, June 24, 2013 with Shanghai's index enduring its biggest loss in four years, after China allowed commercial lending rates to soar in a move analysts said was aimed at curbing a booming underground lending industry. (AP Photo/Richard Drew)
Trader David O''Day, left, works on the floor of the New York Stock Exchange, Friday, June 21, 2013. Global stock markets reeled Monday, June 24, 2013 with Shanghai's index enduring its biggest loss in four years, after China allowed commercial lending rates to soar in a move analysts said was aimed at curbing a booming underground lending industry. (AP Photo/Richard Drew)
Wall Street started Monday where it left off last week: worried about the Fed and China.
Traders in the U.S. dumped stocks, bonds and commodities, prompted by signs of distress in China's economy and worries about the end of the Federal Reserve bank's easy money policies. The selling pushed down the Dow Jones industrial average as much as 248 points in the first hour of trading, and lifted the yield on the 10-year note to its highest level in almost two years.
The sell-off is another a sign of how vulnerable financial markets remain to any comments from the Fed about its $85 billion in monthly bond purchases, which have kept interest rates at historic lows and helped drive the stock market's rally the last four years. On Wednesday and Thursday, the S&P plunged 3.9 percent after the central bank said its bond-buying program could wrap up by the middle of next year as long as economic conditions continue to improve. Stocks edged up Friday, but still had their worst week in two months. Worries about China's growth and tighter lending conditions have also contributed to the market's fall since last Thursday.
"Investors are jittery" about what exactly the Fed is trying to say, said Janet Engels, senior vice president and director of the private client research group at RBC Wealth Management. And then with China, "now we question whether the second-largest economy in the world is going to grow at the rate that everyone had expected. The view is that everything that we thought to be true, now we need to question."
She said the U.S. stock decline "probably has further to go."
The Dow Jones industrial average fell 195 points, or 1.3 percent, to 14,605 as of 12:40 p.m.
The Standard & Poor's index fell 30 points, or 1.9 percent, to 1,562. It is now 6.7 percent below its all-time high reached May 21. The Nasdaq composite fell 59 points, or 1.7 percent, to 3,299.
Banks, which are sensitive to the outlook for economic growth, had some of the biggest losses. All 10 industry groups in the S&P 500 index were lower, led by a 2.8 percent decline in financial stocks. Among individual bank stocks, Bank of America lost 42 cents, or 3.3 percent, to $12.26.
Pullbacks that occur during bull markets tend to be "nasty and brutish," but also "short," said John Manley, chief equity strategist at Wells Fargo Funds Management. He said it's common to get declines of 3 percent to 7 percent "as the market restores a reverence to risk to the investing public."
The last time the U.S. stock market had a full-blown correction ? defined as a drop of at least 10 percent from a peak ? was July 22-Oct. 3, 2011, when the S&P 500 fell 18.3 percent. That fall was caused by concern that a fight between U.S. lawmakers over extending the debt ceiling would push the U.S. into default.
Since starting its bull run in March 2009, the S&P 500 has had six pullbacks of between 5 and 9 percent and two corrections. So far, the market has come back stronger from each setback. The S&P is still up 131 percent during this four-year bull market.
Monday's selling also showed up in the U.S. government bond market, where the yield on the 10-year Treasury note rose from 2.54 percent Friday to 2.59 percent, the highest level in almost two years.
The yield has surged from its 2013 low of 1.63 percent on May 3. The increase accelerated last week after the Federal Reserve laid out its possible timetable for curtailing its bond-buying program. Yields rise when demand for bonds weakens.
The Fed's easy-money policies have kept bond yields and other interest rates artificially low since the financial crisis of 2008, making borrowing cheaper. The 10-year yield is used as a benchmark for many kinds of loans to individuals and businesses, including home mortgages.
The last time the yield was above 3 percent was late July, 2011. The last time it was consistently above 4 percent was July 2008, two months before the peak of the financial crisis.
Before trading began Monday on Wall Street, China's main stock exchange had its biggest loss in four years, and the selling spread to Europe. China's Shanghai Composite Index fell 5 percent, prompted by a government crackdown on off-balance sheet lending, which made investors worry about China's economic growth. France's benchmark stock index fell 1.7 percent, Germany's 1.2 percent.
Metals prices also fell. Gold fell $16 to $1,275 an ounce and silver fell 51 cents to $19.45 an ounce.
Other stocks with big moves included:
? PulteGroup slumped 96 cents, or 5.1 percent, to $17.85. Investors have worried that higher U.S. interest rates will hurt homebuilding companies by making mortgages more expensive.
? Tenet Healthcare rose 95 cents, or 2.3 percent, to $42.81 after offering to buy Vanguard Health Systems Inc. for $1.8 billion. The offer of $21 per share pushed Vanguard stock up $8.58, or 69 percent, to $20.95.
? Facebook fell 94 cents, or 3.9 percent, to $23.59. Monday was the first full trading day after Facebook acknowledged it had accidentally exposed contact information for 6 million users to some other users.
? Apple fell $13.50, or 3.3 percent, to $400 after an analyst said the company appears to have cut back iPhone production. The company didn't have any immediate comment.
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AP Business Writer Steve Rothwell contributed to this report.
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