US stocks, euro drop as deadlock continues in Greece
In this May 11, 2012, photo, trader Jason Harper, right, works on the floor of the New York Stock Exchange. Wall Street ended last week with a decline after JPMorgan said it lost $2 billion on poorly-thought-out trades. (AP Photo/Richard Drew)
NEW YORK – A political stalemate in Greece rattled financial markets worldwide on Monday, sending US stocks lower.
The price of oil and Treasury yields hit their lowest levels of the year as investors dumped riskier assets. The euro sank to a three-month low against the dollar and borrowing costs for Spain and Italy spiked as bond traders anticipated that financial stress could spread far beyond Greece.
The Dow Jones industrial average dropped 107 points to 12,712. The Dow has now lost more than half of its gains for the year in two weeks as worries resurface about Europe and the strength of the US economy.
Political parties in Athens resumed power-sharing talks Monday as negotiations to create a government drag into a second week. The uncertainty has raised concerns that Greece could miss a debt payment and drop the euro currency. The worry is that if Greece leaves the currency union, bond traders may demand steeper borrowing rates from other troubled countries.
The turmoil could easily spread to the US through the banking system. “The large banks are globally connected,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. “The concrete fear is that if Greece exits the euro, that would hurt European banks. They’ll pull back lending to US banks and then they’d be in worse shape.”
In other trading, the Standard & Poor’s 500 index dropped 13 points to 1,340. The Nasdaq composite sank 24 points to 2,909.
The losses swept across the market. All 10 of the industry groups within the S&P 500 fell, led by financial stocks. Morgan Stanley and Citigroup each fell 4 percent.
Major markets in Europe plunged. France’s CAC-40 lost 2.3 percent, and Germany’s DAX 1.9 percent. Benchmark indexes fell 2.7 percent in Italy and Spain.
Traders shifted money into the safest of government bonds, pushing Treasury prices up and their yields down. The yield on the 10-year note hit a low for the year, 1.77 percent.
Since hitting its high for the year on May 1, the Dow has been on a steady slide, closing lower on seven of the previous eight trading days. The Dow’s 1.7 percent loss last week was its worst since Dec. 16.
Among stocks making big moves:
– JPMorgan Chase fell 3 percent following news that its chief investment officer, Ina Drew, would step down. The bank said last week that it lost $2 billion in a trade on corporate debt.
– Yahoo gained 2 percent after the company replaced its CEO, Scott Thompson. Yahoo reportedly pushed Thompson out for padding his resume.
– Electronics retailer Best Buy Co. rose 1 percent after the company’s founder, Richard Schulze, said he would step down as chairman. An investigation found that he knew the CEO was having a relationship with a female employee and didn’t tell an audit committee.
