Wall Street records worst day in a month

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Wall Street records worst day in a month

Stocks suffered their worst day in nearly a month on Monday as concern about the

stalemate in U.S. budget talks and growing debt problems in the euro zone

prompted investors to hedge against further losses.

Reuters, Tuesday 12 Jul 2011

The S & P 500 dropped nearly 2 percent on concerns that Europe's debt crisis would

spread to Italy. European officials were still struggling to solve Greece's

fiscal problems as Italy's markets have been roiled by worry about its banks.

" Today's decline is not necessarily the start of a correction, but suggests we

are in for a wild ride this week, "

said Randy Frederick, director of trading and derivatives at the Schwab Center

for Financial Research in Austin, Texas.

The euro zone's woes added another layer of uncertainty to the stock market

already rattled by Friday's exceptionally weak jobs report.

" What's happening today is something that should have happened on Friday. The

disappointing jobs report on Friday on top of all the concerns on budget talks

and Europe " have prompted the sell-off, Frederick said.

While investors still consider it unlikely there will be no deal on the debt,

the lack of resolution at a time of growing international concerns weighed on

sentiment. The CBOE Volatility Index .VIX or VIX, Wall Street's barometer of

investor anxiety, spiked 15.3 percent.

The Dow industrial average .DJI was down 151.44 points, or 1.20 percent,

at 12,505.76 at the close. The Standard & Poor's 500 Index .SPX was down 24.31

points, or 1.81 percent, at 1,319.49. The Nasdaq Composite Index .IXIC was down

57.19 points, or 2.00 percent, at 2,802.62.

The S & P 500, which lost its gains for the month, was near its 100-day and 50-day

moving averages, both around the 1,316 level. The Dow and the Nasdaq remained

modestly in the plus column.

Dashing hopes for a deal on larger-than-expected spending cuts to tame the U.S.

budget deficit, a highly anticipated Sunday meeting broke little new ground as

President Barack Obama and congressional Republicans kept sparring over taxes.

In a press conference, Obama called for the largest possible deficit-reduction

deal.

ALCOA SHINES LATE

After the bell, Alcoa Inc (AA.N), often viewed as a bellwether of the U.S.

economy, posted a big jump in second-quarter profit partly due to soaring prices

for aluminum and its raw material alumina. The Dow component's stock rose 0.3

percent to $15.96 in extended-hours trading.

For a video on the upcoming season, see: link.reuters.com/caw52s

During the regular session, financials and other economically sensitive stocks

led the day's broad decline. Bank of America Corp (BAC.N) lost 3.3 percent to

$10.35 while Freeport McMoRan Copper & Gold Inc (FCX.N) slid 3.3 percent to

$53.30. An S & P financial index .GSPF dropped 2.8 percent and ranked as the

biggest loser among the S & P 500's sectors.

Global equity markets fell and the cost of insuring Italian debt jumped to a

record amid fears of contagion in Europe's debt markets and reports some

European Union leaders were considering allowing a selective default by Greece.

U.S. exchange-traded funds tracking European equity markets came under heavy

selling pressure. The IShares MSCI Italy Index Fund (EWI.P), a fund that tracks

Italian stocks, fell 6.2 percent while the MSCI Europe Financials Sector Index

Fund (EUFN.P) lost 4.6 percent.

News Corp (NWSA.O) shares dropped 7.6 percent to $15.48 on heavy volume as

Britain looked for a way out of approving the company's multibillion-dollar deal

to buy broadcaster BSkyB (BSY.L) amid a phone-hacking scandal.

Volume was light, with about 6.55 billion shares traded on the New York Stock

Exchange, the American Stock Exchange and Nasdaq, well below last year's daily

average of 8.47 billion.

About six stocks fell for every one that rose on the New York Stock Exchange. On

the Nasdaq, nearly five stocks fell for every one that rose.