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Dow falls to 3-month low

By Alexandra Twin, senior writer

NEWYORK(CNNMoney.com) -- Stocks tumbled Monday, with the Dow ending at a three-month low as worries about the global economic outlook overshadowed a bigger-than-expected rise in existing home sales.

The Dow Jones industrial average (INDU) lost 126 points, or 1.2%, closing at its lowest point since Feb. 2. The S&P 500 index (SPX) declined 14 points, or 1.3%. The Nasdaq composite (COMP) lost 15 points, or 0.7%.

Has the economy really pulled out of its slump?
  • No, its the same
  • No, its getting worse
  • Yes, its much better than 2009
  • Yes, we're entering another boom

Stocks had fallen in the early going, turned mixed through the afternoon and then turned lower near the close.

The housing market report marked a positive start to a busy week for economic news. Investors are looking for evidence that the U.S. economy is holding up despite the turmoil abroad. More housing reports are due later in the week.

Readings are also due on durable goods orders, personal income and spending, and consumer sentiment.

Nonetheless, the positive report was countered by continued worries about the European debt crisis. The euro slumped, erasing last week's gains, following reports that Spain's central bank took over a long-established regional savings bank.

Stocks ended higher Friday at the end of another rough week, in which worries about the European debt crisis and the flailing euro sent global markets lower. For the week, the Dow and S&P 500 both lost around 4% and the Nasdaq fell around 5%.

Since hitting rally highs in late April, the Dow has lost 10.2%, the S&P 500 has slipped 11.8% and the Nasdaq has dropped 12.5% through Monday's close.

The declines of more than 10% off the highs means all three major gauges have met the technical definition of a correction. The selling has also raised worries about whether stocks are heading into a bear market, technically a decline of 20% to 30% off the highs.

"I think it's a correction or a pause rather a bear market," said Dan Genter, president and CEO at Genter Capital Management. "We'll probably be in a holding pattern for a few weeks or the rest of the summer before moving higher."

He said that the market had been "teetering on the top," after running up more than 70% from the March 2009 lows. The run was fueled by a mix of government stimulus and expectations that earnings growth would pick up and the economy would recover.

While those expectations were starting to get fulfilled, investors were looking for more good news to get over the hump, he said. Without additional good news, stocks reacted strongly to the bad news, he said, including the threat of the European debt crisis spreading, the falling euro and the BP oil spill.

Housing: April existing home sales rose 7.6% to a seasonally adjusted 5.77 million annual unit rate from a 5.36 million unit rate in March, the National Association of Realtors reported shortly after the start of trading. Economists surveyed by Briefing.com expected a smaller rise to 5.65 million units. The rise was due largely to the expiration of the homebuyer tax credit at the end of April.

Corporate news: AIG (AIG, Fortune 500) will not face criminal charges, with the Justice Department opting not to pursue the case due to insufficient evidence.

In deal news, IBM (IBM, Fortune 500) is reportedly buying AT&T' (T, Fortune 500)s business software unit Sterling Commerce for $1.6 billion in cash.

Financial stocks slipped, including Dow components Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500). Other big losers included PNC Financial Services (PNC, Fortune 500), Wells Fargo (WFC, Fortune 500), Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500).

The KBW Bank (BKX) index lost 3.3%.

Market breadth was negative. On the New York Stock Exchange, losers beat winners three to two on volume of 1.31 billion shares. On the Nasdaq, decliners topped advancers by eight to five on volume of 2.08 billion shares.

Euro/dollar: The euro lost 0.3% versus the dollar after seesawing over the last week since falling to a four-year low of $1.2234 earlier in the month.

The dollar was little changed against the yen.

World markets: Markets in Europe cut earlier losses to end mixed. Britain's FTSE 100 rose 0.1%, Germany's DAX lost 0.4% and France's CAC 40 was little changed.

Asian markets were mixed. Japan's Nikkei fell 0.3%, while Hong Kong's Hang Seng gained 0.6%. China's Shanghai Composite rallied 3.5%.

Commodities: U.S. light crude oil for July delivery rose 17 cents to settle at $70.21 a barrel on the New York Mercantile Exchange.

COMEX gold for July delivery rose $17.90 to settle at $1,194.70 an ounce.

Bonds: Treasury prices slipped, lifting the yield on the 10-year note to 3.22% from 3.20% where it stood late Friday. Treasury prices and yields move in opposite directions. To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.88%3.83%
15 yr fixed2.84%2.96%
5/1 ARM3.24%3.09%
30 yr refi3.92%3.94%
15 yr refi2.94%3.05%
Rate data provided
by Bankrate.com
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Index Last Change % Change
Dow 16,472.37 200.36 1.23%
Nasdaq 4,707.78 80.69 1.74%
S&P 500 1,951.36 27.54 1.43%
Treasuries 1.99 -0.05 -2.60%
Data as of 7:38pm ET
Company Price Change % Change
Bank of America Corp... 15.38 -0.17 -1.09%
Apple Inc 110.38 0.80 0.73%
Micron Technology In... 15.91 1.14 7.72%
General Electric Co 25.47 0.28 1.11%
Microsoft Corp 45.57 0.96 2.15%
Data as of Oct 2


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