North American stocks fell sharply on Monday, amid dimming hopes for any bold action from European leaders at this week’s meeting to deal with the ongoing sovereign debt crisis.
The Dow Jones industrial average closed at 12,502.66, down 138.12 points or 1.1 per cent. The broader S&P 500 closed at 1313.72, down 21.30 points or 1.6 per cent – marking its second big decline in the past three trading sessions. In Canada, the S&P/TSX composite index was closed at 11,330.39, down 105.15 points or 0.9 per cent.
The declines follow reports that Germany has rejected using joint euro-area bonds as a potential solution to Europe’s debt crisis, dealing a blow to rising expectations that the country might be softening its opposition to such a move. Meanwhile, Cyprus has requested financial aid from the euro zone, citing a spillover effect from Greece and underlining the impression that efforts by European leaders to stem the crisis has had little impact so far.
European stocks were also down. Germany’s DAX index fell 2.1 per cent and the U.K.’s FTSE 100 fell 1.1 per cent. Spain’s benchmark index fell 3.7 per cent.
European government bonds reflected rising anxieties, particularly among some of the more indebted countries. The yield on Spain’s 10-year government bond rose to 6.56 per cent, up about 30 basis points (there are 100 basis points in a percentage point). The yield on Italy’s 10-year government bond rose to about 6 per cent, up 21 basis points. Yields rise as bond prices fall.
Within North America, the losses came despite an upbeat report on U.S. new home sales. Sales rose 7.6 per cent in May, topping expectations and again to pointing to a tentative recovery in the housing market.
However, the report was all-but ignored, given the widespread declines. All 10 subindexes within the S&P 500 ended the day lower, led by economically sensitive areas such as energy, financials and technology stocks. Within the Dow, just one stock within the 30-stock index ended the day higher – that would be Wal-Mart Stores Inc., which rose 1.3 per cent. Among some of the biggest casualties, Bank of America Corp. fell 4.3 per cent and Microsoft Corp. fell 2.7 per cent.
Within Canada’s benchmark index, gold producers helped limit some of the losses after gold rose to $1,588.40 (U.S.) an ounce, up $21.50. Barrick Gold Corp. rose 1.5 per cent.
Energy stocks were again weak after the price of crude oil continued to slide, falling to $78.70 a barrel, down $1.06. Suncor Energy Inc. fell 2 per cent.
Research In Motion Ltd. fell 7.5 per cent, putting the shares firmly below the $10 (Canadian) threshold after the BlackBerry maker rejected a report that it is considering hiving the hardware business from the services business.
Encana Corp. fell 3.7 per cent after saying that it is investigating a Reuters allegation that the company colluded with competitor Chesapeake Energy Corp. to avoid competing against one another in state land auctions.