Stocks slide as Germany cools hope for debt deal

October 20, 2011 - 7:30 AM
Wall Street

In this photo taken Oct. 11, 2011, trader John Santiago, left, works on the floor of the New York Stock Exchange. Further signs that a big plan to deal with Europe's debt crisis will be announced within a week put markets in a positive mood Monday, Oct. 17, 2011, but investors remain wary about whether an effective resolution can emerge over such a short period. (AP Photo/Richard Drew)

NEW YORK (AP) — Stocks opened the week lower Monday after the German government played down hopes that a solution to Europe's debt crisis was imminent.

A spokesman for German Chancellor Angela Merkel said Germany believes that discussions on how to solve Europe's debt problems will last into the new year. Hopes for a quick resolution lifted the S&P 500 to its biggest gain in two years last week.

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 the value of Greek government bonds to plunge, resulting in deep losses for the European banks that hold them. That could lead to a freeze of lending between banks and escalate into another credit crisis similar to the one that occurred in 2008 after the collapse of Lehman Brothers.

At 10 a.m. Eastern, the Dow Jones industrial average was down 88 points, or 0.8 percent, to 11,555. The S&P 500 slid 10, or 0.8 percent, to 1,214. The Nasdaq composite fell 19, or 0.7 percent, to 2,648.

The losses were widespread. All 10 industry groups in the S&P 500 index fell. Hewlett-Packard Co. led the 30 stocks that make up the Dow lower with a 4 percent decline.

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 2.20 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, Wells Fargo & Co. lost 6 percent after the bank's third-quarter revenue fell below Wall Street's expectations. Citigroup Inc. rose 1.6 percent after the bank said a decline in losses from its credit card business helped it beat analyst expectations. Oil services company Halliburton Co. lost 7 percent after missing estimates.