By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks fell about 1% Monday in
their worst drop of the year, as uncertainty over Europe rattled
investors and pushed Spanish bond yields higher.
The Dow Jones Industrial Average (DJI) ended down 129.71 points,
or 0.9%, at 13,880.08. On Friday, it had closed above 14,000 for
the first time since October 2007. Only one out of the Dow
average's 30 components -- Boeing Co. (BA) -- ended higher on
Monday.
While Europe emerging again as an issue for global markets,
including Wall Street, analysts for weeks have been saying that a
correction or even a pullback of 3% to 5% would be welcome.
January's more than 5% advance, which pushed equities to five-year
highs, is seen as an unsustainable trend, and a retreat would draw
in sidelined money.
Elliott Spar, market strategist at Stifel, Nicolaus & Co.,
put it this way: "The book of excuses has been opened wide this
morning in trying to explain this selloff. It goes from European
political issues, higher rates on European peripheral debt to the
Ravens winning the Super Bowl. How about this: The market was long
overdue for a pullback, and buying every dip was just making it too
easy for everyone to make a fast buck."
The S&P 500 Index (SPX) ended down 17.46 points, or 1.2%, at
1,495.71. On Friday it had closed at its highest since December
2007.
On Monday, all 10 S&P 500 industry groups were in the red,
led by losses in tech and financial stocks. McGraw-Hill Cos. (MHP)
and Moody's Corp. (MCO) were the worst performers, off more than
10% each, after Standard & Poor's Ratings Services said the
Justice Department was planning to file civil charges for its role
in rating certain mortgage-bond securities in 2007.
The Nasdaq Composite Index (RIXF) shed 47.93 points, or 1.5%, at
3,131.17.
For every share that rose, nearly four fell on the New York
Stock Exchange, where 693 million shares traded. Composite volume
topped 3.3 billion.
"We had a heck of a run, but you can see the spillover from
Europe today, and we're back to the same old story, with Italian
and Spanish yields in particular spooking European markets," said
Bill Stone, chief investment strategist at PNC Asset Management
Group.
In Spain, Prime Minister Mariano Rajoy is mired in a corruption
scandal amid calls for his resignation from the opposition
Socialist Party. Yields on Spain's 10-year government notes surged
to above 5%.
Reforms implemented in Italy are viewed as at risk by the
increasing popularity of Silvio Berlusconi, with the former prime
minister a contender in general elections slated for later in the
month.
Stocks held sharp losses after the Commerce Department reported
factory orders rose a less-than-forecast 1.8% in December,
illustrating a decline in nondurable goods that overcame advances
in computers and construction equipment.
Herbalife Ltd. (HLF) ended up 1.3% after falling as much as 12%.
The supplement distributor said in a statement that it was
demanding a correction from the New York Post after the newspaper
reported the Federal Trade Commission was investigating it. Late
last year, hedge-fund manager Bill Ackman said he was betting
against the stock, calling Herbalife a pyramid scheme.
Reduced ratings
Wal-Mart Stores Inc. (WMT) shares fell 1.2% after J.P. Morgan
Chase downgraded the discount retailer to neutral from
overweight.
Chevron Corp. (CVX) shed 1.1% after UBS AG downgraded the oil
producer to neutral from buy.
Merck & Co. (MRK) declined 2.3% after Morgan Stanley cut the
pharmaceutical firm to underweight from equal weight.
Oracle Corp. (ORCL) slid 3% after the business-software maker
said it would buy Acme Packet Inc. (APKT) for $1.7 billion. Acme
Packet shares jumped 24%.
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