FOX Business: The Power to Prosper
Selling on Wall Street gathered steam late Monday as shares of tumbling financial stocks like Bank of America shoved the Dow about 100 points into the red.
As of 3:26 p.m. ET, the Dow Jones Industrial Average fell 102.14 points, or 0.86%, to 11765.88, the Standard & Poor's 500 lost 14.28 points, or 1.17%, to 1205.58 and the Nasdaq Composite sank 30.47 points, or 1.19%, to 2524.99.
Without any major economic reports slated for release, U.S. markets were focused on the selloff in the financial sector and a number of global events, including the death of North Korean leader Kim Jong Il.
The choppy trading comes as Wall Street looks to bounce back from last week, which saw the Dow shed 2.6%. Hurt by the European sovereign debt crisis, the benchmark index has ended in the red in four of the last five days.
“It’s disappointing to see the markets starting off the week like this. Really the financials are driving the market lower,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
The financial sector dropped 2%, weighed down by the biggest banks. The selloff comes after The Wall Street Journal reported that the Federal Reserve is expected to embrace the new Basel III requirements for big banks to hold extra capital as a cushion against losses.
The news is “is a negative for the banks, especially short term because they would have to raise capital,” said Pado.
The markets pressured the shares of the banks mentioned as potentially needing to hold this extra capital: JPMorgan Chase (JPM), Citigroup (C), Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS).
At the same time, the sector was hurt by Nomura analysts, who slashed their earnings estimates on a number of stocks, including Citi, Morgan and Goldman due to the tough trading environment and investment-banking trends.
“There’s interbank lending risk, there is risk with the European sovereigns. Stability and certainty are key, especially in the financial world. If you don’t know where rates are or if there’s a bailout coming, then you don’t have any confidence in the financials,” said Pado.
Meanwhile, the euro lost further ground as European Central Bank President Mario Draghi continues to resist pressure to step up bond buying in an effort to ease the sovereign debt crisis. In an interview with the Financial Times, Draghi said, “People have to accept that we have to, and always will, act in accordance with our mandate and within our legal foundations." He said the "important thing is to restore the trust of the people," and "we won't achieve that by destroying the credibility of the ECB."
The euro was recently off 0.17% to $1.3019.
Asian stocks suffered steep selloffs in the wake of the death of Kim Jong Il, who reportedly died over the weekend. While Il was seen as a global pariah and a threat to the U.S. and its allies, investors may be fearing his death and the transition of power to his son will cause new uncertainty and political instability. South Korea and Japan, two of North Korea's main enemies, put their militaries on alert, while the White House said it is monitoring the situation.
The Kospi Composite, which is South Korea's main stock market, plunged as much as 4.4% before settling down 3.4% at a four-week low. Likewise, markets in Japan and Hong Kong closed sharply lower.
In the commodities market, crude oil fell 30 cents a barrel, or 0.32%, to $94.05. Gold declined $1.20 a troy ounce, or 0.08%, to $1,594.40.
Winn-Dixie (WINN) reached a $530 million deal to be sold to fellow Southeastern supermarket owner BI-LO. The deal is worth $9.50 a share, representing a lofty 75% premium on Winn-Dixie’s Friday close.
AT&T's (T) efforts to sell T-Mobile assets to placate regulators have gone cold, casting further doubt on the $39 billion deal, The Wall Street Journal reported. Alternatives to a full-blown merger such as a joint venture to share network technology or a minority stake appear more likely, the paper reported.
Xilinx (XLNX) slashed its fiscal third-quarter sales guidance, projecting a 9% to 12% drop due to a decline in large customer business. Previously, the company projected a reduction of 3% to 8%.
The British FTSE 100 fell 0.41% to 5364.99, France’s CAC 40 gained 0.06% to 2974.20 and Germany’s DAX lost 0.54% to 5670.71.
In Asia, Japan’s Nikkei 225 slumped 1.26% to 8296.12, while Hong Kong’s Hang Seng declined 1.18% to 18070.20.