US stocks fell on Monday, led by financial stocks, including Bank of America, JP Morgan Chase and American Express, as the seizure of a Spanish bank reignited concerns about the euro zone's financial system, while investors continue to fret over the potential impact of a regulatory overhaul in the US.
The Dow Jones Industrial Average dropped 126.82 points (1.24%) to 10,066.57. The measure's drop wiped out its 125.38-point Friday gain and was led by its financial components. Bank of America slid 59 cents (3.7%) to $15.40, JP Morgan fell $1.43 (3.6%) to $38.62, and American Express lost 78 cents (2%) to $39.04.
Home Depot was alone among the Dow's 30 components to end the session in the black. The home-improvement retailer eked out a gain of 20 cents (0.6%) to $33.22, bolstered by data showing a bigger-than-expected rise in existing-home sales for April.
The Nasdaq Composite declined 15.49 (0.69%) to 2,213.55. The Standard & Poor's 500 index fell 14.04 (1.29%) to 1,073.65. All of the measure's sectors ended Monday's session in the red, led by financials.
The declines followed the Bank of Spain's rescue of regional savings bank CajaSur over the weekend, which fanned worries that sovereign-debt woes could keep spreading. In addition, following the US Senate's passage last week of its regulatory overhaul bill for the financial sector, investors are getting antsy about what the final bill will look like once it's reconciled with the House's version.
Although stocks ended Monday's session solidly in the red, they were choppy throughout the day, fluctuating between slight gains and negative territory, as investors tried to determine whether the recent correction should signify a buying opportunity or a cause for concern.
Citigroup was one of just a few stocks in the S&P 500's financial sector that rose on Monday. Citigroup eked out a gain of 3 cents (0.8%) to $3.78, after analysts raised their investment rating on the banking giant's stock to buy from neutral.
Apple rose $4.44 (1.8%) to $246.76, after a broker laid out what it called a "bull case" for the popular maker of consumer electronics goods, saying the stock could be worth $400 a share under that scenario.
DreamWorks Animation tumbled $3.82 (11%) to $31.05. "Shrek Forever After," the fourth instalment in the company's popular "Shrek" series, opened at No. 1 at the box office in the US and Canada, but its box-office sales of $71.3m fell below expectations, suggesting consumers could be hesitating to pay the premium for 3-D films.
For Australian ADRs listed on the NYSE, BHP Billiton weakened $1.03 (1.65%) to US$61.50, Rio Tinto Plc dropped 40 cents (0.94%) to US$42.08, ResMed gained 97 cents (1.59%) to US$62.10, Telstra Corporation shed 11 cents (0.89%) to US$12.20, Telecom Corporation of NZ lost 1 cent (0.15%) to US$6.60 and Westpac dipped 14 cents (0.15%) to US$94.20.
In economic news, US existing home sales rose by 7.6% in April to a 5.77m annual rate from March, as buyers took advantage of the Obama administration's first-time home-buyer credit. Economists were expecting a 4.7% hike.
The Chicago Federal Reserve says its closely-watched National Activity Index rose to 0.29 in April - its highest level since December 2006 - from a revised 0.13 in March, despite the continued drag of consumption and housing data.
At 7:45 AM (AEST), the 10-year Treasury note yield was 3.20% and the five year yield was 1.99%.
European shares edged higher on Monday, as gains from miners offset losses in the banking sector after the nationalisation of a Spanish savings bank over the weekend.
After a 4.6% downturn last week to a 2010 low, the Stoxx Europe 600 index rose 0.4% to 237.97 in a choppy session.
Miners, which are leveraged to economic growth, advanced, with Rio Tinto up 1.7% and Anglo American up 2%.
Of the major regional benchmarks, the UK FTSE 100 index closed up 0.1% to 5,069.61, the French CAC-40 index finished roughly unchanged at 3,430.93 and the German DAX index lost 0.4% to 5,805.68.
The UK kicked off its own fiscal-deficit-reduction efforts on Monday, detailing GBP6.2bn of budget cuts.
The Bank of Spain's takeover of savings bank CajaSur on Saturday didn't help sentiment towards banks. Spain's largest banks, Banco Santander, down 0.9%, and BBVA, down 1.9%, lost ground, pressuring the Ibex 35 index, which traded down 1.3% to 9,288.90.
BP shares fell 2.7% as the oil giant faces continued pressure over the Gulf of Mexico oil spill. BP said that the cost of the Gulf of Mexico oil spill response to date amounts to about US$760m, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid and federal costs.
Asian stock markets were mostly higher with property developers in China rising on hopes that Beijing may ease up on future tightening measures to curb the property market, though shares in Japan ended mostly lower as investors were still cautious about debt troubles in the euro zone.
Japan's Nikkei Stock Average fell 0.3% to end at 9,758.40, the weakest closing level since early December, while China's Shanghai Composite gained 3.5% and Hong Kong's Hang Seng Index climbed 0.6%.
New Zealand shares ended stronger following Wall Street's lead but concerns about bellwether Telecom weighed on a market that isn't yet convinced about the sustainability of offshore rallies. The NZX-50 Index, which tumbled 2.0% on Friday to a nine-month low, ended 0.4% higher, or 11.14 points, at 3,061.22.
Base metals ended higher after US stocks recouped losses on some better-than-expected US housing data and the euro stabilised against the US dollar. Aluminium rose $35 (1.70%) to $2,090 while copper firmed $125 (1.83%) to $6,940 and nickel added $840 (3.93%) to $22,230. Zinc strengthened $25 (1.32%) to $1,920 and lead gained $50 (2.79%) to $1,845. Comex copper was last quoted at 311.95 US cents per pound.
Benchmark gold futures ended a four-day losing streak when investors, still worried about euro-zone debt issues, used last week's price retreat as an opportunity to increase safe-haven purchases of the metal. Spot gold was last quoted at $1,191.40. Comex gold futures climbed $17.90 (1.52%) to $1,194.00. Spot silver was last quoted at $17.84.
Crude ended slightly higher, though the oil market looked to have turned a corner after three weeks of steady declines. West Texas Intermediate was last quoted at US$65.96 per barrel.
At 07:45 a.m. (AET) the US dollar was quoted at 0.8105 euros, 90.15 yen, 1.215 AUD and 69.44 pence.