Stocks fall on fresh European bank concerns
NEW YORK (AP) — Fresh worries about European banks sent stocks lower Tuesday. Treasury prices rose as investors sought out safe places to park their money.
The Dow Jones industrial average fell about 80 points, getting the holiday-shortened week off to a weak start.
With little economic news in the U.S. following the Labor Day weekend, traders were focused on developments overseas.
European stocks fell following news reports that banks there may have more risky government debt on their books than was disclosed during “stress tests” earlier this year. That could mean fees from regulators and more capital-raising by the banks to bolster their balance sheets.
“The soundness of stress tests are, and continue to be, in question,” said Brian O’Reilly, president of the Collingwood Group. Uncertainty about the tests could be a drag on the market until European regulators provide some more transparency about exactly what figures were included in the test, O’Reilly said.
Shares of European banks mostly fell and the dollar rose against the euro.
The reports renewed worries about Europe’s government debt, which had flared up earlier this year following a fiscal crisis in Greece that spread to other weak European economies including Portugal and helped bring stock prices down worldwide.
The Dow fell 80.75, or 0.8 percent, to 10,367.18 in afternoon trading.
The Standard & Poor’s 500 index fell 9.39, or 0.9 percent, to 1,095.12, while the Nasdaq composite index fell 19.47, or 0.9 percent, to 2,214.28.
About three stocks fell for every one that rose on the New York Stock Exchange, where volume came to 353.1 million shares.
Volume often starts to pick back up after Labor Day when traders return from summer vacations. But Brian Peardon, a wealth adviser at Harrison Financial Group, said many investors might continue to stay out of the market even when they get back because of uncertainty about the global economy.
“It’s very tough for the public to decipher what’s happening,” Peardon said.
Uncertain investors continue to pour money into the safety of Treasurys. The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.64 percent from 2.71 percent late Friday. Its yield is often used as a gauge to set interest rates on mortgages and other consumer loans.
Several reports later this week could shed more light on the U.S. economy including the “beige book” report from the Federal Reserve coming out on Wednesday and weekly unemployment numbers due out on Thursday.
“What it’s going to take to keep (a rally) going is more good news,” said James Angel, professor of finance at Georgetown University’s McDonough School of Business. Economic data continues to show the economy is growing, but the exact pace of that growth is still uncertain.
The inconsistency in economic reports has left traders overreacting to every bit of news released, Angel said. Stocks last week got a big lift after better-than-expected reports on manufacturing and employment after falling for nearly all of August.
Shares of Swiss bank UBS AG dropped 50 cents, or 2.8 percent, to $17.55. Spanish bank Banco Santander SA fell 40 cents, or 3.2 percent, to $12.28.
Barclays PLC fell $1.17, or 5.8 percent, to $19.11. The British bank also announced Robert E. Diamond Jr., who built the company’s global investment bank, will take over as CEO next year.
In other corporate news, Oracle Corp. named former Hewlett-Packard Co. CEO Mark Hurd co-president. The two companies had been longtime partners, but are now competitors in the computer server market. Oracle shares jumped $1.24, or 5.4 percent, to $24.16. Hewlett-Packard fell 30 cents to $40.04.
Britain’s FTSE 100 fell 0.6 percent, Germany’s DAX index dropped 0.6 percent, and France’s CAC-40 fell 1.1 percent.