Stocks closed lower on Monday, with investors again rattled by the political impasse in Greece, which is raising concerns that the country could be about to leave the euro zone.
The Dow Jones industrial average closed at 12,695.35, down 125.25 points or 1 per cent. The blue-chip index has fallen during eight of the past nine trading sessions, erasing a total of 4.4 per cent during the losing streak. The broader S&P 500 closed at 1338.35, down 15.04 points or 1.1 per cent, touching its lowest level since early February.
In Canada, the S&P/TSX composite index closed at 11,488.53, down 206.14 points or 1.8 per cent. That marks the benchmark index's fifth triple-digit decline over the past nine sessions.
The weak market conditions have coincided with a number of unsettling developments in the world, from sluggish U.S. employment growth, to worries about slowing economic activity in China, to signs that Europe is sliding into a deeper-than-expected recession.
The latest jitters, though, come from Greece where recent elections have created a deadlock among politicians, preventing the formation of a coalition government. The longer the impasse drags on amid a European-wide backlash against austerity measures, the more observers worry that Greece will renege on commitments to cut spending – forcing it out of the euro zone.
While Greek bond yields are already in the stratosphere amid this uncertainty, other countries are also seeing their bond yields rise – in some cases sending their borrowing costs to unsustainable levels. The yield on Spain's 10-year government bond rose to 6.2 per cent, up 22 basis points (there are 100 basis points in a percentage point). The yield on Italy's 10-year government bond rose to 5.67 per cent, up 19 basis point. As yields rise, bond prices fall.
Meanwhile, investors have been flocking to U.S. government bonds for safety, sending yields lower. The yield on the 10-year Treasury bond fell to 1.78 per cent on Monday, marking its lowest level since October.
U.S. financials were the hardest hit among the 10 subindexes in the S&P 500, suggesting ongoing fallout from last week's announcement from JPMorgan Chase & Co. that it had sustained a $2-billion (U.S.) trading loss – worrying investors that U.S. banks have again become reckless in their risk-taking. JPMorgan shares fell 3.2 per cent after falling more than 9 per cent on Friday.
In Canada, commodity producers were the weakest elements after commodities – as represented by the Reuters/Jefferies CRB index – fell for a fifth straight day. Crude oil fell to $94.78 a barrel, down $1.35. Gold fell to $1,561 an ounce, down $23. Among Canadian producers, Suncor Energy Inc. fell 2.6 per cent and Barrick Gold Corp. fell 1.2 per cent.