NEW YORK -- U.S. blue-chip stocks fell Tuesday and the Nasdaq composite index pared earlier gains as China said it raised a stamp duty on stock trades in Chinese markets and a sharp drop in oil prices hurt shares of energy companies.
Traders said Beijing's attempt to cool its red-hot stock market may be seen as a sign that perhaps U.S. equities needed to consolidate after the market's recent rally on a wave of takeovers and share buybacks.
"The concern is that China may be acknowledging that their markets are overheated by the action they've taken today," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.
"With our market being as extended as it is and relatively overbought, any little ripple like this (China news) is grounds for the market to sell off."
The Dow Jones industrial averagewas down 38.19 points, or 0.28 percent, at 13,469.09. The Standard & Poor's 500 Index was down 2.00 points, or 0.13 percent, at 1,513.73. The Nasdaq Composite Indexwas up 5.30 points, or 0.21 percent, at 2,562.49.
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China's Ministry of Finance made the midnight announcement through the official Xinhua news agency, an unusual move that underlined deep government concerns about speculation in the stock market. China's benchmark stock index has risen 62 percent so far this year on top of a 130 percent jump last year. The Shanghai Composite Index has repeatedly hit record highs this month.
In the 16-year history of the modern Chinese stock market, an increase in stamp duty has always caused a market slump over the following few weeks or ended a bull run.
Exxon Mobil Corp. was the biggest drag on both the Dow and the S&P 500, falling with oil prices as concerns eased about threats to disrupt output in Nigeria and more U.S. refinery units resumed business.
Exxon's stock lost 1.8 percent to $82.05 on the New York Stock Exchange, as U.S. crude for July delivery dropped $2.02 to $63.18 a barrel on the New York Mercantile Exchange.
The dowturn in the energy sector offset optimism about takeover news involving technology companies such as Avaya Inc. and CDW Corp..
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