Stocks slide after China raises rates

NEW YORK (AP) -- Stock indexes fell in midday trading Monday after China moved to raise interest rates to combat spiking inflation.

A blizzard in the Northeast is making this a quiet day on Wall Street by disrupting commutes for many people who in the financial industry. Trading is expected to be light throughout the week as the New Year's holiday approaches.

A year-end rally based on improving economic reports and the extension of tax cuts for another two years has pushed stock indexes to two-year highs.

In midday trading, the Dow Jones industrial average fell 34 points, or 0.3 percent, to 11,540. The Standard and Poors 500-stock index fell 2, or 0.2 percent, to 1,255. The Nasdaq composite index fell 14, or 0.5 percent, to 2,653.

China's move over the weekend is the second time in three months that the country has taken steps to slow the pace of its economic expansion. Inflation jumped to its highest levels in two years in November. Any slowdown in China can affect stocks worldwide. Bank of America Corp. estimates that emerging markets like China account for 80 percent of the worlds economic growth.

Shares were down sharply overseas. The Euro Stoxx 50, which tracks blue chip companies in countries that use the euro, fell 1.2 percent. Asian stock markets closed down less than 1 percent.

American International Group Inc. shares rose 8.9 percent to lead the S&P index. The insurer said Monday that it had obtained $3 billion in credit facilities, making another step on its road to recovery.

Cisco Systems Inc. gained 2.3 percent to $20.15 to lead the 30 stocks that make up the Dow index. Alcoa Inc. had the largest loss. The company fell 1.6 percent to $15.10.

Eight of the 10 company groups in the S&P 500 fell. Financial companies, which rose 0.6 percent, had the largest change of any group.

The yield on the 10-year Treasury note rose slightly to 3.41 percent.