Associated Press//October 17, 2011
//October 17, 2011
NEW YORK — Stocks opened the week lower Monday after the German government played down hopes that a solution to Europe’s debt crisis was imminent.
Expectations that a resolution to the crisis could be reached at a European summit in Brussels Oct. 23 helped lift the S&P 500 to its biggest gain in two years last week. Germany’s finance chief Wolfgang Schaeuble said Monday those expectations were too optimistic.
A batch of weak corporate earnings reports also pulled stocks lower. Gannett Co. Inc. plunged 8 percent, the most of any stock in the Standard & Poor’s 500 index, after the newspaper publisher reported a drop in advertising. Wells Fargo sank after posting results that fell short of analysts’ expectations.
At 12:25 p.m. Eastern, the Dow Jones industrial average was down 162 points, or 1.4 percent, to 11,481. Hewlett-Packard Co. led the Dow lower with a 4 percent decline.
The S&P 500 index slid 15, or 1.3 percent, to 1,209. The losses were widespread. Utilities were the only one of the 10 industry groups in the S&P 500 that rose.
The Nasdaq composite fell 40, or 1.5 percent, to 2,628.
Stock markets around the world rallied last week after the leaders of France and Germany pledged to come up with a far-reaching solution to the region’s debt crisis by the end of October. That pledge appeared to be pushed back by German officials Monday. Schaeuble said he expects European leaders to adopt a framework to tackle the crisis on Sunday. A spokesman for German Chancellor Angela Merkel said discussions on how to solve Europe’s debt problems will likely last into the new year.
Concerns about a messy default by the Greek government have been the main cause behind many of the stock market’s big swings lately. The fear is that a default would cause deep losses for the European banks that hold Greek bonds. That could freeze lending between banks and escalate into another financial crisis similar to the one that occurred in 2008 after the collapse of Lehman Brothers.
The apparent setback on Europe’s debt crisis coincided with mixed economic reports in the U.S. A measure of U.S. industrial production rose for a third month, but a gauge of New York area manufacturing fell more than Wall Street expected.
The mixed results helped push up the price of lower-risk assets. The yield on the 10-year Treasury note fell to 2.19 percent from 2.25 percent late Friday. Bond yields fall when demand for them increases and investors become more willing to accept lower returns in exchange for holding assets they consider to be safe.
In corporate news, Kinder Morgan said late Sunday that it would buy El Paso Corp. for $20.7 billion. The deal would create America’s largest natural gas pipeline operator. El Paso jumped 23 percent. Kinder Morgan Inc., gained 6 percent.
Banks were lower. Citigroup Inc. fell 0.8 percent, less than the market, after the bank said a decline in loan losses helped it beat Wall Street’s profit forecasts. Wells Fargo & Co. lost 6 percent after the bank’s third-quarter revenue fell below expectations.i