Wall St falls as euro-zone bond yields rise
Stocks fell on Monday as rising bond yields in Italy and other euro-zone countries reminded investors that despite changes in governments, the region's debt crisis could still spin out of control.
Banks posted the largest losses, but overall volume was unusually weak. The KBW bank index dropped 2.5 percent, with Bank of New York Mellon down more than 4 percent.
The S&P 500 found strong resistance after closing on Friday near its 200-day moving average and close to the top of a trading range the index has held for three months.
Initial relief over the appointment of a technocrat to head the new government in Italy after the resignation of Silvio Berlusconi gave way to worries that unpopular austerity measures will not be enough to fix the country's finances. For details see.
Benchmark yields in Italy, France and Spain edged higher from the end of last week and closed near session highs. Rising bond yields are being watched carefully because every rise in interest rates threatens the ability of Italy and other countries to finance themselves.
That sign of a reversal of what had been a more favorable trend in Europe is what the (equities) market worried about today, said Jeff Kleintop, chief market strategist at LPL Financial in Boston.
That has raised worries that European problems are not that much behind us.
Stocks have lately focused on headlines from Europe as traders react to the escalating sovereign debt crisis in the euro zone. Italian benchmark bond yields rose above 7 percent last week, a level that forced countries with a lower debt burden to seek bailouts. With debt of more than 2 trillion euros, Italy is considered too big to bail out.
Yields on 10-year Italian debt rose to 6.76 percent on Monday.
The Dow Jones industrial average dropped 74.70 points, or 0.61 percent, at 12,078.98. The Standard & Poor's 500 Index fell 12.07 points, or 0.96 percent, at 1,251.78. The Nasdaq Composite Index lost 21.53 points, or 0.80 percent, at 2,657.22.
At 5.5 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, the third-lowest number so far this year and down more than 30 percent from the year's daily average of just over 8 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of 16 to 5, while on the Nasdaq, about three stocks fell for every one that rose.
Stocks continued to track the euro, which fell more than 1 percent against the dollar.
Adding to the gloom in the region, industrial production in the euro zone fell in September, the most since early 2009. Output at factories in the 17-nation group declined 2 percent for the month.
LPL Financial's Kleintop said the data mostly confirmed the market's anticipation of a mild recession in the euro zone.
Italy's debt in the credit default swap market rose to a record at the close of 569 basis points, up from 525 basis points on Friday, according to data provider Markit. This means it would cost 569,000 euros per year to insure 10 million euros of Italian debt for five years.
French and Spanish CDs costs also rose to record highs, according to Markit.
Limiting losses on the Dow, Boeing Co shares rose 1.5 percent to $67.94 after the U.S. planemaker announced a large order.
Shares of Bank of America Corp dropped 2.6 percent to $6.05 as the lender plans to sell most of its remaining stake in China Construction Bank Corp for $6.6 billion in a move to raise capital.
Bank of New York Mellon Corp fell 4.5 percent to $20.55 after it said it expects to take a hit against earnings of up to $100 million in the fourth quarter.
(Reporting by Rodrigo Campos; Editing by Kenneth Barry)
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