NEW YORK -- A steep fall in commodity prices led the stock market to its worst day this year on Monday, as worries about the global economy resurfaced.
The Dow Jones industrial average dropped 265 points, its biggest loss in five months.
The first trigger came from China. News that the world's second-largest economy slowed unexpectedly pummeled oil, copper and other commodities. In the stock market, companies that produce oil and mine for metals fared the worst. A slowdown in China, a huge importer of basic materials like copper, would stymie profits at those companies.
"The weak data out of China is spooking a lot of investors," said Dan Greenhaus, chief global strategist at the brokerage BTIG.
Oil prices hit their lowest level since mid-December, and gold plunged below $1,400 an ounce for the first time in two years as a sell-off in metals continued from last week. Concerns that Cyprus and other troubled European countries may sell gold to raise cash have also weighed on prices for precious metals, Greenhaus said.
The Dow lost 265.86 points to close at 14,599.20, a drop of 1.8 percent. Caterpillar, a maker of heavy equipment used by miners, led the Dow lower, falling 3 percent to $82.27. The Standard & Poor's 500 index slumped 36.48 points to 1,552.37, a loss of 2.3 percent.
It was the biggest drop for the stock market since Nov. 7 -- Election Day -- last year.
China's economy expanded 7.7 percent in the first three months of the year, well below forecasts of 8 percent or better. That news pummeled copper, oil and other commodities. Crude oil slid $2.58 to finish at $88.71 in New York trading
The plunge in commodity prices hit mining and energy stocks. Cliffs Natural Resources lost 8 percent to $17.61. Freeport-McMoRan Copper & Gold fell 8 percent to $29.27, the worst drop in the S&P 500. Analysts at Citigroup placed a "sell" rating on the mining giant on the expectation that copper prices will continue sliding.
Of the 10 industry groups in the S&P 500, materials and energy stocks fared the worst, losing 4 percent. Indexes of small companies and transportation stocks, which are more vulnerable to swings in the economy, also fell 4 percent.
The Nasdaq composite fell 78.46 points, or 2.4 percent, to 3,216.49.
Gold prices dropped $140 to $1,361 an ounce, a 9 percent fall. Gold has now slumped $203 an ounce over the past two days.
Frank Fantozzi, CEO of Planned Financial Services, a wealth management firm, says people had bought gold since the financial crisis on the belief it was safe place to keep money. But now that the metal has slid 20 percent this year, they're jumping out.
"I think you're getting some panic selling right now" in the gold market, said Fantozzi. "People who have been holding on to gold expecting a rebound are now thinking, 'I better get out.'"
Cetin Ciner, a finance professor and expert in precious metal markets at the University of North Carolina, Wilmington, said others bought gold as a protection against rampant inflation when the economy recovered. They helped push gold prices as high at $1,900 in 2011. But the high inflation they worried about still hasn't hit.
Gold "was bound to collapse at some stage," Ciner said. "People were waiting and waiting for higher inflation, and they finally realized it's not happening."
Just seven stock rose in the S&P 500 on Monday. Among them, Citigroup inched up 9 cents to $45.87, after the country's third-largest bank reported earnings that beat analysts' estimates. Stronger revenue from trading and investment banking lifted the bank's results.
Sprint Nextel jumped after Dish Network offered $25 billion to buy the company. Dish's bid is aimed at beating an offer from the Japanese phone company SoftBank. Sprint surged 14 percent to $7.06, and Dish fell 2 percent to $36.77.
Thermo Fisher Scientific offered $13.6 billion to buy genetic testing equipment maker Life Technologies. That works out to $76 in cash for each share of Life Technologies. Thermo Fisher's stock fell 1 percent to $78.58, while Life Technologies rose 7 percent to $73.11.
In the market for U.S. government bonds, the yield on the 10-year Treasury note retreated to 1.69 percent, its lowest level of the year. That's down from 1.72 percent late Friday.
The last time the 10-year yield hit 1.69 percent was April 5, when the government reported that U.S. employers hired far fewer workers than expected in March.
People buy U.S. government bonds when they're concerned about the economy.