Dow plummets on news of factories slowing

Investors yanked money out of stocks Thursday after new reports from the United States and China pointed to a sharp slowdown in manufacturing.

The Dow Jones industrial average plunged 251 points, the second-biggest drop this year.

Losses in energy and materials companies led a widespread rout on the stock market. The Dow started sinking after 10 a.m., when the Philadelphia branch of the Federal Reserve reported a sharp contraction in manufacturing in the Northeast. The losses accelerated throughout the day.

"The news has been horrible out there," said Uri Landesman, president of Platinum Partners. "The U.S. economy is slowing down. And China's growth is definitely under question."

The bad news kept piling up. Mining and other companies that make basic materials fell hard after prices for commodities such as copper and oil dropped. Goldman Sachs analysts advised clients to bet stocks would fall, and speculation swirled Moody's Investors Service would cut the credit ratings of 17 banks. After the markets closed it did cut ratings of 15 of the world's largest banks, as part of a broad review of major financial institutions.

A new report that manufacturing slowed in China was troubling since that country's economy has helped drive global economic growth over the past four years. China is a major importer of copper and other basic materials.

The Dow lost 250.82 points to close at 12,573.57. The Standard & Poor's 500 index declined 2.23 percent to 1,325.51. The Nasdaq composite fell 2.44 percent to 2,859.09. All three lost their gains for the week.-- With Reuters