Stocks remained in the red by late morning Monday after disappointing U.S. construction spending in December pointed to even weaker economic growth in the fourth quarter.
The S&P 500 was down 0.56%, the Dow Jones Industrial Average slid 0.5%, and the Nasdaq tumbled 0.43%.
Construction spending edged higher in December, though missed estimates. Spending in the U.S. rose 0.1% to $1,116.6 billion to end last year, weaker than a forecast 0.6% increase. November's read was revised to show a 0.6% decline.
The disappointing read pulls likely fourth-quarter GDP growth to just 0.5%, according to BNP Paribas analysts. The Bureau of Economic Analysis had pegged fourth-quarter GDP at 0.7% growth in its first estimate released last week.
Manufacturing in the U.S. remained in contraction for its fourth straight month in January. The ISM Manufacturing Index remained at 48.2 in January compared to an expected increase to 48.3.
U.S. consumer spending remained flat in December even as personal income rose, according to the latest data from the Commerce Department. Income rose 0.3% over the month, while the U.S. savings rate increased 5.5% from 5.3%. Consumers have benefited from lower gas prices in the past few months which economists had hoped would fuel increased consumer spending.
The report is "an indication that U.S. households are rebuilding a formidable precautionary savings war chest that could cushion spending in the event of a downturn," explained Millan Mulraine, deputy chief U.S. macro strategist at TD Securities. "Households are continuing to stock away their labor and energy windfall income, which should provide a favorable platform for sustaining personal spending in the event of a downturn."
The latest reading on China's factory activity fell to a three-year low, dropping further into contraction territory. The Purchasing Managers' Index fell to 49.4 in January from 49.7 a month earlier. Factory activity has been in contraction for sixth straight months, triggering fears over the health of the world's second-largest economy and officials' ability to correct course through stimulus measures.
Weaker data from China exacerbated worries over demand for crude oil. West Texas Intermediate crude oil fell 4.8% to $32.01 a barrel. Prices have fallen 16% since the beginning of the year.
Lumber Liquidators (LL) - Get Report spiked more than 11% after trading was briefly halted for volatility. Shares surged on reports the company has reached a deal with the Department of Justice to settle investigations into whether it illegally sourced timber products.
Twitter (TWTR) - Get Report jumped 11% on talk of a potential deal in the works with venture capitalist Mark Andreessen and private-equity firm Silver Lake Partners. Twitter has yet to comment on the rumors.
Twitter is a holding in Jim Cramer's Action Alerts PLUScharitable trust portfolio.
You see Jim Cramer on TV. Now, see where he invests his money and why Twitter is a core holding of his multi-million dollar portfolio.
Want to be alerted before Jim Cramer buys or sells TWTR? Learn more now.
Alere (ALR) jumped 45% after Abbott Laboratories (ABT) - Get Report agreed to buy the company in a deal worth $5.8 billion. Abbott will pay $56 a share, a 50% premium on Friday's closing price. The deal will grow Abbott's diagnostics testing portfolio.
Credit Suisse (CS) - Get Report and Barclays (BCS) - Get Report moved lower after agreeing to pay $154.3 million to settle government investigations into their "dark pool" exchanges. The Securities and Exchange Commission and the New York Attorney General had been investigating claims the banks misled clients about being able to safely trade on their "dark pool" financial exchanges. The settlement is the largest for investigations into privately-run stock exchanges.
Dominion Resources (D) - Get Report fell 1.6% after agreeing to buy Questar (STR) in a cash deal valued at $4.4 billion. The Virginia-based energy company will pay Questar shareholders $25 a share, around a 30% premium to its January average price. The deal will likely close by the end of the year.
Nokia (NOK) - Get Report slumped 12% after issuing disappointing guidance following a patent deal agreement with Samsung Electronics. The company expects to receive around 1.3 billion euros ($1.4 billion) in cash through to 2018 thanks to the patent agreement with Samsung. Investors had hoped for higher revenue from the deal.
Health insurer Aetna (AET) climbed 1.7% after a better-than-expected quarter. The company said fourth-quarter profit jumped 38% as revenue rose 2% to $15.09 billion. Adjusted earnings of $1.37 a share beat estimates of $1.20 a share.