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Wall Street’s European sovereign debt headache returned on Tuesday to put a stop to the markets’ four-day winning streak and push the Dow more than 100 points into the red.
The Dow Jones Industrial Average fell 107.24 points, or 1.03%, to 10340.69, the S&P 500 lost 12.67 points, or 1.15%, to 1091.84 and the Nasdaq Composite dropped 24.86 points, or 1.11%, to 2208.89. The FOX 50 slid 8.32 points, or 1.04%, to 787.99.
Tuesday’s selloff erased a chunk of Wall Street’s best pre-Labor Day week in two decades and was driven mainly by concerns about the fallout of the sovereign debt crisis resurfacing. The worries were highlighted by a wave of selling in the euro and financial stocks like UBS (NYSE:UBS).
“At the end of the day, there really is nothing going on in the economy that can sustain any upward move. Without the financials, it’s really tough for the markets to do anything on a sustained basis,” NYSE veteran trader Ted Weisberg of Seaport Securities told FOX Business. “I think we’re probably in trouble until the next quarterly earnings reports.”
Last week the Dow snapped its three-week slump by surging 297 points, or 2.93%, amid enthusiasm for less-awful-than-expected reports on U.S. manufacturing and the jobs picture. The benchmark index had been in the midst of its first four-day winning streak since July 27.
“This will be a week free of any meaningful data releases and void of earnings so I suspect the bears will have an opportunity to pull the ghosts of recent past back into focus,” Peter Kenny, managing director at Knight Capital Group, wrote in a note. “Chasing this past week’s rally is a fool’s errand. If the market is pricing in the decreased likelihood of a double dip, then we are priced in fairly fully.”
Most of the Dow's 30 stocks closed in the red, led by American Express (NYSE:AXP) and Walt Disney (NYSE:DIS). Two of the index's best performers were defensive plays Coca-Cola (NYSE:KO) and McDonald's (NYSE:MCD).
Financial stocks were the biggest drags, losing 2.2% amid a selloff in European banks like the U.K.'s Barclays (NYSE:BCS) and Spain's Banco Santander (NYSE:STD). The group was hurt by a Wall Street Journal report questioning whether the European bank stress tests were tough enough and by concerns that lenders there may need to raise more cash. The developments underscored the fact that while Europe's sovereign debt crisis has faded in the headlines in recent months, the continent’s debt headaches have not been fixed.
The European concerns sparked a selloff in the euro, which tumbled 1.42% to $1.2690, weighing on commodities and commodity-related stocks. Crude oil slid 51 cents a barrel, or 0.68%, to $74.09. Copper dropped 0.86% to $3.4635 Benefiting from the uncertainty, gold rallied $8.10 a troy ounce,or 0.65%, to $1,257.30.
Technology stocks failed to rally around Oracle (NASDAQ:ORCL), which saw its stock jump 6% after announcing it has tapped former Hewlett-Packard (NASDAQ:HPQ) CEO Mark Hurd as its president. Hurd was seen as a very successful leader of H-P, but was pushed out in a controversial move sparked by ethics violations. H-P filed suit against Hurd on Tuesday, alleging violations of a confidentiality provision, the Journal reported.
Barclays (NYSE:BCS) CEO John Varley will step down and be replaced by Barclays Capital President Robert Diamond, who led the U.K. lender’s acquisition of the investment-banking operations of bankrupt Lehman Brothers. Varley, with Barclays since 1982, will exit his position on March 31, 2011 and will remain on the bank’s board of directors through the end of September 2011.
Hartford Financial (NYSE:HIG) and Lincoln National (NYSE:LNC) lost more than 4% a piece after the Treasury Department announced plans to unload over the next several weeks warrants it received in the insurers as part of the controversial TARP bailout. The U.S. owns 52 million warrants in Hartford and 13 million warrants in Lincoln and said the sales will occur over the “next several weeks.”
HSBC (HBC) Chairman Stephen Green is reportedly steeping down effective in January to become Prime Minister David Cameron's Trade Minister. It’s not clear who will replace Green.
Air Products (NYSE:APD) upped its bid for Airgas (NYSE:ARG) to $65.50 a share, representing a 50% premium on the stock. The previous offer stood at $63.50.
The U.K.'s FTSE 100 lost 0.58% to 5407.82, France's CAC 40 slumped 1.11% to 3643.81 and Germany's DAX lost 0.60% to 6117.89.
In Asia, Tokyo's Nikkei 225 closed down 0.8% to 9226.00, Hong Kong's Hang Seng advanced 0.22% to 21401.80 and China's Shanghai Composite rose 0.08% to 2698.36.