Drop in China's market worries U.S. investors

NEW YORK - Stocks fell in light trading yesterday after a 6.7 percent plunge in China's main stock market sent a wave of selling around the world and added to concerns that stocks have rocketed too high, too fast since hitting 12-year lows in March.

The Standard & Poor's 500 index rose 3.4 percent in August for its sixth straight monthly gain. It is up 50.9 percent since early March, the best six-month run since 1938.

Yesterday's trading followed a pattern seen several times during August, with U.S. stocks falling alongside other world markets after China's Shanghai exchange slid on uneasiness about that country's economy. If China is struggling, its problems could affect the recoveries in other countries, including the United States.

Energy and materials stocks posted some of the biggest losses yesterday as prices for commodities such as crude and copper slid on concerns that demand from China would fall.

Since tumbling to a 12-year low in March, the Dow is up 45.1 percent, and the Nasdaq is up 58.4 percent.

The Dow fell 47.92, or 0.50 percent, to 9,496.28. The S&P 500 index slid 8.31, or 0.81 percent, to 1,020.62, while the Nasdaq dropped 19.71, or 0.97 percent, to 2,009.06.

The Russell 2000 index of smaller companies fell 7.79, or 1.34 percent, to 572.07.

Japan's Nikkei stock average fell 0.4 percent after the country's opposition party came to power in a landslide victory. Germany's DAX index fell 1 percent. France's CAC-40 lost 1.1 percent. The London Stock Exchange was closed for a holiday.

China's Shanghai Composite Index is down more than 20 percent from its peak in early August.

Oil tumbled $2.78 to settle at $69.96 a barrel on the New York Mercantile Exchange. Copper fell 4.2 percent.

The drop in commodities weighed on commodities producers. Aluminum manufacturer Alcoa Inc. posted the biggest drop among the 30 stocks that make up the Dow, falling 45 cents, or 3.60 percent, to $12.05. Freeport-McMoRan Copper & Gold Inc. slid $2.50, or 3.82 percent, to $62.98.

Investors looked past an improvement in Midwest business conditions. The Chicago Purchasing Managers index, which measures business activity in Illinois, Michigan, and Indiana, jumped to 50.0 in August from 43.4 in July, ending 10 consecutive months of drops.

The index is considered a precursor to the Institute for Supply Management's manufacturing index, which is due today. A reading above 50 indicates growth in manufacturing, something that has not happened since January 2008.