2013.04.1602:30:50UTC+00U.S. stocks fell the most in 5 months on China

U.S. stock indexes lose most in five months Monday, swept up in a rush out of gold, oil and other commodities, after reports from China displayed the industrial giant’s progress had slowed.

Soured sentiment built as the session wore on, exacerbated by a drop in a gauge of U.S. home builders’ confidence. Some strategists voiced out that the pullback was expected after stock indexes notched records last week.

“The market is down because it’s extended. It has been going up in the face of bad macro news,” said Brian Belski, chief investment strategist at BMO Capital Markets. China was “a reality check,” he said.

The Dow Jones Industrial Average closed near its lows of the day, down 265.86 points, or 1.8%, to 14,599.20. The S&P 500 index decreased 36.49 points, or 2.3%, to 1,552.36. The Nasdaq Composite sank 78.46 points, or 2.4%, to 3,216.49.

As stocks decline, more investors piled in. Volume in New York Stock Exchange-listed stocks was 4.6 billion, the biggest day in a month, and topping the year-to-date average of 3.5 billion. Total market volume was the largest this year, according to the Wall Street Journal’s data group.

Adding to market participants’ anxiety Monday afternoon were reports of explosions at the finish line of the Boston Marathon.

“It just throws another issue at Wall Street, creates an enormous amount of uncertainty,” Hugh Johnson, chairman of Hugh Johnson Advisors, told MarketWatch Radio.

The day’s sell off was the worst since Nov. 7, the day after the U.S. presidential election, when investors turned their fears to an impending “fiscal cliff” of tax hikes and budget cuts.

The Monday rout was an abrupt pause in a rally that has seemed all but unstoppable. From the Cyprus bailout that risked breaking up the euro zone, to U.S. budget cutbacks, investors have repeatedly shown an interest in purchasing stocks on the dip. As a result, deep selloffs have often turned into mild retreats by day’s end, causing some strategists to wonder if investors are getting too complacent — particularly given last week’s disappointing data on U.S. retail sales.

Scott Redler, chief strategist for T3Live.com, stated that he’s been watching to see whether stocks could hold on to recent gains after the S&P 500 hit an intraday record of 1,597 last week. “What is important after a breakout is measuring the validity of the breakout. If it fails to hold and turns into a bit of a trap, take notice,” he wrote in emailed comments.

U.S. equity losses were an extension of a selloff that took place in Europe and Asia after China reported that its gross domestic product for the January-through-March quarter grew 7.7% from a year earlier, less than forecasts calling for growth of 8%, while industrial production in April slowed to 8.9%, the weakest in more than a year.

Gold was hit hard by that news. It ended Monday’s session with a loss of more than $140, its worst one-day performance since the early 1980s. Other metals, notably silver, and oil also slumped.