Equities dropped after a weaker-than-expected report on US manufacturing and a decline in oil prices as France appears set to join the US and the UK in tapping some of its strategic oil reserves.
In early afternoon trading in New York, the Dow Jones Industrial Average dropped 0.77 percent, the Standard & Poor's 500 Index shed 0.90 percent, and the Nasdaq Composite Index fell 0.89 percent. Energy shares were leading the markets lower.
US crude oil futures dropped more than 2 percent after reports that several governments, including the US, were considering the release of oil reserves to lower prices to avoid that the rising cost of oil could crimp an economic recovery.
Yet the US Energy Department today said supplies increased 7.1 million barrels to 353.4 million last week, the largest gain since July 2010. That news helped drive down shares of energy companies including Exxon Mobil and Occidental Petroleum.
The latest American economic data underpinned concern that the US isn't out of the woods yet. New orders for manufactured goods rose a less-than-expected 2.2 percent in February and a gauge of future business investment also missed expectations. Economists had called for an increase of 3.0 percent in durable goods orders.
"While today's data fell a bit short, it was still OK. But the market has raised the bar on economic numbers, which is positive because we are starting to see improvement in the sentiment," Mike Shea, managing partner and trader at Direct Access Partners in New York, told Reuters.
To be sure, the Federal Reserve Bank of New York released research that painted a positive picture on the outlook for American employment; the jobless rate could fall to as low as 6 percent by the first half of 2013, a larger drop than most economists currently predict.
US unemployment was steady at 8.3 percent last month, the lowest level in three years. The March payrolls report is scheduled to be released next week.
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In Europe, the Stoxx 600 Index slid 1.1 percent for the day.
European governments are preparing for a one-year increase in the ceiling on rescue aid to 940 billion euros to keep the debt crisis at bay, Bloomberg News reported, citing a draft statement written for finance ministers.
The UK economy is struggling more than expected. Office for National Statistics data showed that the economy contracted 0.3 percent in the fourth quarter, surpassing the 0.2 percent contraction previously estimated. Real household disposable income dropped 1.2 percent.
"We expect that real incomes will fall again this year, reflecting low nominal wage growth and little or no job growth,” Michael Saunders, an economist at Citigroup in London, told Bloomberg. “Consumer spending is likely to remain subdued for several years.”
(BusinessDesk)
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