Please ensure Javascript is enabled for purposes of website accessibility

Stocks fall Monday on Ireland bailout, Wall Street probe

NEW YORK — Stocks fell Monday as investors worried about fallout from Europe’s financial crisis and a widening probe into Wall Street insider trading.

Bank stocks led the declines after the Federal Bureau of Investigation raided the offices of two hedge funds as part of a broad insider trading probe. Investment bank Goldman Sachs Group Inc. sank 4.3 percent, while Morgan Stanley and Bank of America Corp. each fell 3 percent.

The Dow Jones industrial average was down 42.61 points, 0.4 percent, to 11,160.94 in afternoon trading. The Dow was down as much as 149 points earlier before recouping some of its losses.

Bank stocks were already under pressure because of concerns over how the bailout of Ireland would affect their investment portfolios and their ability to increase dividends.

“As part of the Ireland bailout, banks will have to take a haircut,” said Benjamin Wallace, securities analyst at Grimes & Co in Westborough, Mass. “All these issues bring into question whether banks are strong enough to pay out dividends next year, and whether the government will ask them to hold on to more capital for some more time.”

Ireland formally asked for help from its neighbors Sunday following weeks of pressure from the European Union. While details of the package are still being worked out, Ireland’s government slipped further into crisis Monday as a coalition partner of Prime Minister Brian Cowen threatened to abandon his coalition in protest of the bailout.

It was the second time this year that the European Union has come to the rescue of one of the 16 countries that use the euro. In May, the EU and the IMF committed $140 billion to Greece to prevent the country from defaulting on its debt.

While Ireland and Greece have relatively small economies, the fear is that a loss of confidence by investors could spread to other weak countries that use the euro such as Portugal and Spain. That could weaken the value of the euro against other currencies, raise borrowing costs for European countries and possibly require even more bailouts.

The euro had been recovering against the dollar since last Wednesday as Ireland moved closer to accepting a bailout, but fell back 0.7 percent Monday as investors fretted that a resolution to Ireland’s debt problems may be further off than many had hoped.

“It’s been difficult for the European Union to get ahead and stay ahead of the market’s concerns, despite the large sums they are clearly willing to dedicate,” said Robert Tipp, the chief investment strategist for Prudential Fixed Income. Ireland’s announcement that it would seek assistance contributed to stock losses because it was not detailed enough to restore investor confidence, he said.

The Standard & Poor’s 500 index fell 4.18, or 0.4 percent, to 1,195.55.

Technology shares edged higher, led by a 2.6 percent gain in Inc. and a 1.2 percent rise in Apple Inc. The technology-focused Nasdaq composite index rose 8.03, or 0.3 percent, to 2,526.15.

Investors will sort through a full plate of economic data this week but trading will be shortened by the Thanksgiving holiday on Thursday.

Reports set to be released Tuesday and Wednesday include October home sales, an update of consumer sentiment, and revisions to earlier estimates of the third-quarter gross domestic product.

Some economists expect that the latest reading on U.S. economic growth for the third quarter will be slightly higher that the previously estimated 2.0 percent increase.

Hewlett-Packard Co. will release earnings after the market closes. It will be Hewlett-Packard’s first earnings report since former chief executive Mark Hurd resigned in August amid allegations of sexual harassment. He was replaced by chief financial officer Leo Apotheker.