Stocks Fall Sharply on Tightening in China

Stocks fell sharply Friday as world markets were rattled over China's decision to tighten capital requirements for banks.

The Dow Jones Industrial Average was down more than 100 points, or over 1 percent, as the halfway point approached. Just to put it in perspective: After some wild swings this week, the Dow is roughly where it ended last Friday, which was 10,012.

Though China has been long expected to continue its tightening measures, the timing of the measure caught markets off guard. China raised capital requirements by half a percentage point.

The news boosted the dollar but sent stocks and commodities lower. Crude fell below $74 a barrel and gold dropped to around $1,080.

All 30 Dow components were lower, led by Caterpillar, Alcoa and Boeing .

Consumer names fared the best: Kraft , P&G and Wal-Mart were just slightly lower and in fact Kraft was struggling to push higher.

That was after a report showed U.S. retail sales rose 0.5 percent in January, on target, but auto sales remained weak.

"Consumers have indeed become increasingly open to purchases that extend beyond everyday staples," Brian Sozzi, an equity research analyst at Wall Street Strategies, noted, but cautioned that "February retail sales may break the trend seen in spending since last summer given very poor weather conditions across the country."

P&G got an additional boost as Credit Suisse initiated coverage of the stock with an "outperform" rating and price target of $74.

Speaking of autos, Toyota said it's planning a new level of disclosure— beyond the legal requirement — when it comes to safety problems with its vehicles.

MMM shares skidded after Bank of America-Merrill Lynch downgraded the stock to "underperform" from "neutral," saying it sees less upside potential.

Berkshire Hathaway shares rose as investors cheered the impending arrival of Warren Buffett's conglomerate on the S&P 500 after the closing bell today. As a result, index funds were selling other stocks which accounted for some of the S&P's decline.

Among other U.S. indicators: Reuters and the University of Michigan reported their consumer-sentiment index fell to 73.7 in a mid-February reading from 74.4 at the end of January; economists had been expected the gauge to rise to 75.

And business inventories fell unexpectedly in December, though sales continued to rise.

Europe received more bad news as German GDP disappointed and Greece, not surprisingly, also missed its mark on economic growth.

On the Greece front, the IMF joined the EU, adding its support to the bailout on Friday.

Still to come: Crude oil inventories at 11am ET. Analysts expect a build of 1.4 million barrels.

In addition, the Senate Banking Subcommittee will discuss the subject of systemic risk at 2:30 pm with Federal Reserve Governor Daniel Tarullo testifying.

On Tap for Next Week:

MONDAY: All US financial markets closed for President's Day.
TUESDAY: Empire State manuf. survey; Fed's Lockhart, Kocherlakota speak; NAHB housing index; Earnings from Merck, Kraft, Abercrombie & Fitch and Whole Foods
WEDNESDAY: Weekly mortgage apps; housing starts; import prices; industrial production; Fed's Plosser speaks; Fed minutes; Earnings from HP, ADI, Nvidia, Priceline
THURSDAY: PPI; weekly jobless claims; leading indicators; Philly Fed; weekly crude inventories; Fed's Duke, Lockhart & Bullard speak; Earnings from Wal-Mart, DirecTV, CBS and Dell
FRIDAY: CPI; Earnigns from JCPenney

Send comments to