MarketView for March 6

Summary

The Dow Jones Industrial Average fell more than 200 points on Tuesday, handing Wall Street its worst day in three months as renewed fears of a disorderly default in Greece took hold, along with rising concerns that China's slowdown might have an adverse impact on global growth.

It was the Dow's first drop of more than 200 points since November 23. Yet the expectation of a pullback has been there for some time as many on the Street appeared to be convinced that the markets are in an “overbought,” condition. You might ask yourself if this is a self-fulfilling prophesy.  

Despite the day's decline, the S&P 500 is still up almost 7 percent for the year. The last time the S&P 500 fell more than 1 percent was in late December. If fourth-quarter gains are included, the benchmark index is still up almost 20 percent since September 30.

Meanwhile, Wall Street's anxiety gauge, the CBOE Volatility Index or VIX was up about 16 percent to near 21, rising above its 50-day moving average for the first time since November. That led to about 10 stocks sliding downward for every one that rose on the New York Stock Exchange, with bank and mining shares among the top decliners. Morgan Stanley lost 5.3 percent to $17.32.

Equities' recent rally has continued without a substantial pullback since December, supported in part by expectations that Europe's credit crisis would be contained and China's economy could avoid a hard landing.

Apple’s shares fell, but outperformed the broader market after volatile swings in recent days. The stock closed down 0.5 percent at $530.26.

Europe's downturn appeared ready to turn into a full-fledged recession due to a collapse in household spending, exports and manufacturing in the final months of 2011, the European Union said.

Brazil's gross domestic product expanded by a meager 2.7 percent in 2011, data showed Tuesday, adding to concerns after China cut its growth outlook earlier in the week. Expected growth in emerging markets has been a main catalyst for equities' gains.

A group representing Greek bondholders warned a default could cause more than 1 trillion euros ($1.3 trillion) of damage to the region. Creditors have until Thursday night to accept a bond swap in which they would lose almost three-quarters of the value of their bonds. As part of a reassessment of possible collateral damage if the Greek deal with private debt holders collapses, traders sold the stocks of large banks on concern about their exposure to Greece. Greece has no plans to extend the deadline on its bond-swap offer to private creditors, officials said, dismissing market rumors that the date may be changed to increase participation in the offer.

Basic materials stocks ended the day lower as commodity prices fell, pressured further by a stronger U.S. dollar. Alcoa ended the day down 4.1 percent to close at $9.47 and Freeport-McMoRan Copper & Gold fell 2.5 percent, closing at $39.44.

Utilities, a traditional defensive play, were the best-performing S&P sector during Tuesday's slide.

About 7.6 billion shares changed hands on the three major equity exchanges, a number that was above the daily average of 6.9 billion shares.