China concerns give market biggest drop in month

NEW YORK (AP) — The stock market posted its biggest drop in a month on concerns that tighter lending in China could endanger an economic recovery. Disappointing earnings from IBM and Morgan Stanley added to investors’ angst.

At the same time, a spike in the dollar pushed commodity prices sharply lower Wednesday, hurting stocks of energy companies and materials producers.

The Dow Jones industrial average fell 122 points from a 15-month high but ended well off its lows for the day. Demand for safe havens such as government debt rose, pushing yields lower in the Treasury market.

Stocks have posted sharp swings since last week as investors try to determine the overall direction of the market. The Dow fell 101 points Friday and jumped 116 Tuesday.

The latest slide came as concern grew that China’s efforts to cool its rapid growth could hurt a global recovery. A top banking regulator said Wednesday that China will increase monitoring of banks as it tries to prevent speculative bubbles in areas such as real estate. Last week China took steps to restrict runaway lending.

Investors are also questioning whether a 68.2 percent gain in the benchmark Standard & Poor’s 500 index in the past 10 months has been too much. Those doubts are intensifying as more companies report results from the final three months of 2009 this week. The early read is that cost-cutting has again helped boost profits, but revenues remain disappointingly weak.

IBM Corp. led the Dow lower. The company reported late Tuesday that its earnings rose 9 percent from a year earlier, while sales rose less than 1 percent. The company’s forecast was seen as cautious.

“We might see profitability out of companies this season but we’re not really seeing revenue growth,” said Dan Cook, senior market analyst at IG Markets in Chicago.

Banks posted mixed results. Bank of America Corp. reported better results and said credit conditions were improving, but also said the economic environment is “fragile.” Wells Fargo & Co. sounded an optimistic note on consumer resilience, but Morgan Stanley fell short of expectations.

According to preliminary calculations, the Dow fell 122.28, or 1.1 percent, to 10,603.15. The Dow had been down as much as 208 points.

The broader S&P 500 index fell 12.19, or 1.1 percent, to 1,138.04, and the Nasdaq composite index fell 29.15, or 1.3 percent, to 2,291.25.

Cook said questions about the stability of the market are likely to increase as Feb. 1 approaches.

That is when the Federal Reserve plans to halt most of the emergency lending programs it set up to help revive the economy.