Wall Street Posts Worst Close in Over a Year
Wall Street suffered another slump Monday as concerns about the economy, contagion from the European debt crisis and rumors of an American Airlines bankruptcy dragged down markets.
Despite a brief rally on news that a key indicator of the health of the U.S. manufacturing sector was better than expected, the main indexes ended the day firmly in the red.
The Dow Jones Industrial Average was down 258.08 points (2.36 percent) at 10,655.30 at the close, its lowest level since September 2010.
The S&P 500 fell 32.19 (2.85 percent) to 1,099.23, and the tech-heavy Nasdaq fell 79.57 points (3.29 percent) to 2,335.83.
"A new quarter brought more of the same on Wall Street," said Sameer Samana of Wells Fargo. "Worries about Europe drove the Dow sharply lower after Greece said it will miss its deficit targets for 2011 and 2012."
Banking stocks took much of the brunt.
Bank of America traded down 9.6 percent, Citigroup was down 9.8 percent, JPMorgan Chase was down 4.9 percent and Morgan Stanley was down 7.6 percent.
Also in the spotlight was American Airlines.
Its shares ended the day down a whopping 33.1 percent, amid rumors that parent company AMR Corp would file for bankruptcy protection.
Morningstar analyst Basili Alukos said the selling comes after an "abnormal" number of pilot retirements in the past two months, with the pilots seeking to sell off their own stocks in the company out of fears it would fail.
That view was rejected by other analysts.
"While we view AMR as the financially weakest US airline, it had $5.0 billion in cash/investments at the end of Q2. Our Q3 forecast is for a loss of about $110 million, and we do not think the company has been burning through an unreasonable amount of cash," said Jim Corridore of Standard & Poor's Equity Research.
"For this reason, we would be surprised by a bankruptcy filing in the next 12 months."
The broader market had kicked-off the day amid a now-familiar sea of red -- on news that Greece will not meet deficit-cutting targets -- the focus on Wall Street turned to the domestic.
The Institute of Supply Management's purchasing managers index (PMI), a closely watched indicator of sentiment in the manufacturing sector, showed a surprise rise.
"The PMI registered 51.6 percent, an increase of one percentage point from August, indicating expansion in the manufacturing sector for the 26th consecutive month, at a slightly higher rate," said ISM's Bradley Holcomb.
Economists had expected the index to grow at a slower rate to 50.5 points.
The figure pushed the Dow to a modest rise of around 0.2 percent over the start of the day.
But news from Europe continued to weigh on U.S. markets.
Bond prices rose significantly. The 10-year Treasury bond yield dropped to 1.75 percent from 1.92 percent Friday, while the 30-year yield fell to 2.72 percent from 2.92 percent.
Bond prices and yields move in opposite directions.