Stocks sink after retail sales slip, China slows

NEW YORK - Signs of weakness in China's economy and a weak start to the holiday shopping season knocked the stock market lower on Monday.

The Standard & Poor's 500 index fell 14 points, or 0.7 percent, to 2,054 as of 12:20 p.m. ET. The Dow Jones industrial average dropped 39 points, or 0.2 percent, to 17,790, while the Nasdaq composite fell 58 points, or 1.2 percent, to 4,733.

Earlier sales, more online shopping and a mixed economy meant fewer Americans showed up to shop over Thanksgiving weekend, the National Retail Federation said Sunday. The trade group estimated that total spending for the weekend totaled $50.9 billion, down 11 percent from last year.

Major retail stocks slumped. Macy's lost $1.72, or 3 percent, to $63.20, and Target fell $1.15, or 2 percent, to $72.81. Best Buy lost $2.18, or 6 percent, to $37.23.

After six straight weeks of steady gains, the stock market may be due for a breather, said Peter Cardillo, chief market economist at Rockwell Global Capital. Reports of slow economic growth around the world and falling oil prices could be the catalyst. But he thinks any setback will likely prove temporary. "Maybe the weakness in the global economy will take some of the starch out of our economy," he said. "It probably will, just not so much that it really hurts corporate earnings."

DreamWorks Animation slumped after its latest movie, "Penguins of Madagascar," had a weaker box-office opening over the Thanksgiving weekend than analysts had expected. The sequel to its popular "Madagascar" movie took second place to the newest installment of "The Hunger Games" series. DreamWorks' stock plunged $1.79, or 7 percent, to $22.07.

December has proven to be the stock market's best month. The S&P 500 has ended the month with an average gain of 1.7 percent since 1950, according to the "Stock Trader's Almanac." But after an 11 percent run this year, the market looks relatively expensive. The S&P 500 index trades at 17.6 times its profits over the past 12 months, well above the long-term average.

U.S. benchmark crude rose $1.89 to $68.04 a barrel in New York after hitting a five-year low earlier Monday. The recent slide in the price of oil has pushed Russia's currency, the ruble, down nearly 5 percent against the dollar. Russia's economy depends heavily on oil revenue.

Major stock markets in Europe closed with slight losses. Germany's DAX sank 0.2 percent, and France's CAC 40 dropped 0.3 percent. Britain's FTSE 100 slid 1 percent. Russia's RTS index lost 1.6 percent.

A survey by HSBC showed Chinese manufacturing activity weakened in November, adding to signs an economic slowdown is deepening. HSBC said its purchasing managers' index edged down to 50 from 50.4 the previous month. On the index's 100-point scale, numbers below 50 indicate contraction. The bank said domestic demand was sluggish and new orders were weak. China's economic growth slowed to a five-year low of 7.3 percent in the latest quarter.

"The November PMIs confirm that growth in China's industry remains under downward pressure," Louis Kuijs of Royal Bank of Scotland wrote in a report to investors. "The surprisingly meager development of the new export order component in today's PMI indices suggests that global demand growth also remains subdued."

Hong Kong's Hang Seng index plunged 2.6 percent, while the Shanghai Composite Index slipped 0.1 percent. In Japan, Tokyo's Nikkei 225 added 0.8 percent.

Prices for U.S. government bonds slipped. The yield on the 10-year Treasury note inched up to 2.19 percent from 2.16 percent late Friday, still close to its low for the year. High demand for bonds keeps yields low. The dollar fell to 118.51 yen from Friday's 118.61 yen. The euro rose to $1.2489 from $1.2448.