U.S. stocks fall after sell-off in Asia

NEW YORK -- After giving the market solid gains in August, investors backtracked on the final day of the month after a sell-off in Asia triggered by a sharp drop in Chinese shares.

Stocks fell after a 6.7% plunge in China's main index prompted selling in other countries. The decline in stocks was broad, but the biggest losses were among energy and material companies as prices for commodities like crude and copper plummeted.

The Dow Jones industrial average fell 47.92, or 0.5%, to 9,496.28. The Standard & Poor's 500 index fell 8.31, or 0.8%, to 1,020.62, while the Nasdaq composite index lost 19.71, or 0.9%, to 2,009.06.

The selling of Chinese shares has been fed by concerns over a tightening in bank lending that could hurt that country's economy. China, which has continued to grow despite the global recession, is a major consumer of U.S. exports including commodities. Chinese stockpiling this year of such goods as copper and soy have helped drive up commodities prices.

"As China goes, so goes a lot of the rest of the world," said Brian Nick, investment strategist at Barclays Wealth.

The sell-off in China rattled investors who were already on edge going in to the last trading day of August. With stocks up more than 45% since early March, investors are worried that the market may have gotten too far ahead of the economy. Key reports later this week on manufacturing and employment in August could either upset the market's six-month rally or help push it forward.

Without evidence of actual economic growth, analysts have warned that the market's rally could fizzle in the coming weeks, especially as traders head into September, historically a rough month for the stock market.

"The markets have been looking like they've been somewhat reluctant to hold their gains over the last couple of sessions," said Blaze Tankersley, chief market strategist at Bay Crest Partners, adding that the news out of China provided investors with a good excuse to sell some stocks.