DJIA Falls More Than 500 Points

(AP) -- The Dow Jones Industrial Average slumped more than 500 points Monday as investors looked ahead to this week's Federal Reserve meeting amid mounting signs of slowing economic growth around the world.

Major indexes opened modestly lower and began a steady descent around midday. All 30 stocks in the Dow industrials and all 11 sectors in the S&P 500 ended lower.

The declines pulled the technology-heavy Nasdaq Composite into the red for the year, while the Russell 2000 index of small-capitalization stocks slumped into a bear market--a decline of more than 20% from its Aug. 31 high. And U.S. crude settled below $50 a barrel for the first time in 14 months.

Trade frictions, worries about slowing global growth and geopolitical tensions have curbed risk appetite among investors in recent months.

"It's a treacherous market right now," said Paul Brigandi, managing director and head of trading at Direxion, who added investor sentiment has shifted. "The 'buy-the-dip' mentality used to work really well, and prior downturns were short lived. This time it hasn't happened."

The blue-chip index dropped 508 points, or 2.1%, to 23593. The S&P 500 declined 2.1%, while the Nasdaq Composite fell 2.3%, pulling it down 2.2% for the year.

The Russell 2000, meanwhile, slumped 2.3% to 1378, ending the Russell's bull run that began in April 2016. Shares of small U.S. companies have underperformed their larger peers in recent months, a shift from earlier in the year, when investors flocked to small-caps as a shelter from trade-related tensions.

The Fed will conclude its final policy meeting of the year Wednesday and while analysts widely expect the central bank to raise short-term interest rates, the focus will be on the Fed's outlook for next year. Rising interest rates pose a challenge for small-cap firms, in particular, because they tend to have a much higher proportion of debt. As interest rates climb, so will the interest on loans that small businesses carry.

President Trump tweeted Monday that it was "incredible" that central-bank policy members were considering raising borrowing costs again, continuing his public campaign against tighter monetary policy.

Softening economic data and falling oil prices have led many traders to price in a more gradual course of rate increases for 2019. Remarks in November by Fed Chairman Jerome Powell, who said rates looked like they were "just below" neutral, a level that would neither speed nor hamper economic growth, also are guiding expectations.

The uncertainty comes amid a rocky stretch for financial markets. The Dow industrials tumbled nearly 500 points Friday, putting all three major U.S. indexes in correction territory -- typically defined as a drop of at least 10% from a recent high -- for the first time since March 2016. U.S. stocks are off to their worst start to a December since 1980.

The Nasdaq is off 17% from its August high. The S&P 500 and the Dow industrials, meanwhile, are off 13% and 12% from their respective recent highs.

"Investors are losing confidence in the direction and the progress that we're making on monetary policy and trade," said Timothy Chubb, chief investment officer of Univest Wealth Management. "Powell has to be careful with his words because investors are looking for any doubt in the Fed's mind that global economy is on strong footing."

The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was down 0.3%. The 10-year U.S. Treasury note yield fell to 2.857% from 2.891% on Friday. Yields move inversely to prices.

In Monday's session, defensive-oriented groups, such as real-estate and utility shares, were the weakest performers in the broad index. Both groups lost more than 3%.

Consumer-discretionary stocks also underperformed. Best Buy and Amazon.com dropped 6% and 5%, respectively. Bank of America Merrill Lynch downgraded Best Buy to "underperform" from "neutral," lowering its price target to $50 a share from $70.

Despite the declines in consumer-discretionary shares, Lisa Erickson, head of the traditional investment group with U.S. Bank Wealth Management, has been advising clients recently to add exposure to that area because of strong earnings, opposed of defensive sectors such as utilities and real estate.

"Certainly defensive stocks have a nice profile in terms of being very" steady, Ms. Erickson said. "But right now we feel like investors in uncertain times are going to reach more towards that extra opportunity for growth."

Health-care stocks also came under pressure after a federal judge in Texas ruled Friday that the Affordable Care Act is unconstitutional. Shares of HCA Healthcare shed 3.1%, while UnitedHealth Group fell 2.7%.

Johnson & Johnson, which lost $39.8 billion in market value Friday after Reuters reported last week that the company knew for years that its baby powder sometimes contained asbestos, continued to slide. J&J denied the claim. Shares were down 3.2% Monday.

Meanwhile, Goldman Sachs Group dropped 3% after Malaysian authorities filed criminal charges against banking units and a former partner of the firm in connection with the 1MDB financial scandal, the country's attorney general said.

Elsewhere, the Stoxx Europe 600 fell 1.1%. Recent data indicating that economies in Europe and China are slowing have sparked worries that the malaise could spread to the U.S., despite relatively steady readings on the American economy.

In Asia, Japan's Nikkei finished 0.6% higher, while Hong Kong's Hang Seng was flat.

(BE)