Stocks moved sharply lower during trading on Monday after seeing considerable volatility last week. Lingering concerns about the ongoing European debt crisis weighed on the markets amid worries about the impact on the global economy.
After moving sharply lower in early trading, the major averages remained stuck firmly in the red throughout the session. The Dow fell 138.12 points or 1.1 percent to 12,502.66, the Nasdaq tumbled 56.26 points or 2 percent to 2,836.16 and the S&P 500 slid 21.30 points or 1.6 percent to 1,313.72.
The sell-off on Wall Street came as traders kept a close eye on the latest developments in Europe, where Spain formally asked for a bailout to shore up its ailing banking sector.
Europe is likely to remain in focus throughout the week, as European leaders are due to hold a summit to discuss the ongoing debt crisis on Thursday and Friday.
Peter Boockvar, managing director at Miller Tabak, said, "With Germany just not giving in to the requests for largesse that the rest of Europe wants them to disperse in the form of socializing debt obligations in the Euro region, nothing of substance will come out of the Thurs/Fri EU summit and markets today are realizing that."
"Without German allowance money, pressure will then build on the ECB to print money to the obvious dismay of the Germans," he added.
Meanwhile, traders largely shrugged off a report from the Commerce Department showing a bigger than expected increase in U.S. new home sales.
The report showed sales of new single-family homes at a seasonally adjusted annual rate of 369,000 in May, a 7.6 percent increase from the revised April rate of 343,000. Economists had expected new home sales to climb to 350,000.
With the much bigger than expected increase, new home sales in May came in at their highest level since April of 2010.
Reflecting broad based selling pressure due to the global economic concerns, most of the major sectors showed notable moves to the downside on the day.
Oil service stocks posted particularly steep losses, moving lower along with the price of crude oil. With crude for August delivery sliding $0.55 to $79.21 a barrel, the Philadelphia Oil Service Index fell by 3.4 percent.
Considerable weakness was also visible among semiconductor stocks, as reflected by the 3.5 percent loss posted by the Philadelphia Semiconductor Index. Veeco Instruments (VECO) helped to lead the sector lower, with the semiconductor equipment maker plunging 11.4 percent.
Networking stocks also moved sharply over the course of the trading day, dragging the NYSE Arca Networking Index down by 3.2 percent. Emulex (ELX) and Acme Packet (APKT) turned in two of the sector's worst performances.
Electronic storage, brokerage, steel, and airline stocks also posted steep losses on the day, while gold stocks bucked the downtrend amid a notable increase by the price of the precious metal.
In overseas trading, stock markets across the Asia-Pacific region came under pressure during trading on Monday. Japan's Nikkei 225 Index fell by 0.7 percent, while Hong Kong's Hang Seng Index ended the day down by 0.5 percent.
The major European markets also showed significant moves to the downside on the day. While the U.K.'s FTSE 100 Index tumbled 1.1 percent, the German DAX Index and the French CAC 40 Index plummeted by 2.1 percent and 2.2 percent, respectively.
In the bond market, treasuries moved notably higher amid the weakness among stocks. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 6.4 basis points to 1.608 percent.
Any further developments in Europe are likely to take center stage on Tuesday, although trading could also be impacted by the release of reports on U.S. home prices and consumer confidence.
by RTT Staff Writer
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