Tuesday, Nov 01, 2011

--Stocks drop on renewed fears over euro-zone debt

--Europe roiled by Greece's decision to hold bailout referendum

--Data on manufacturing activity fall a bit below economists' expectations 


 
   By Steven Russolillo 
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--U.S. stocks slid in a broad global stock-market selloff, as Greece's plans for a referendum fueled worries that the euro-zone bailout plan might fall apart.

The Dow Jones Industrial Average sank 276 points, or 2.3%, to 11679 in early-afternoon Tuesday trade, led lower by J.P. Morgan Chase's 6% fall and Bank of America's 5.4% drop. The Dow's decline came after the blue-chip index slid 276 points on Monday, its biggest-point drop since late September.

Greece announced after European markets had closed on Monday that it would hold a referendum on the government's deal with euro-zone leaders, which raised uncertainties over whether the bailout plan would survive. Greece also called for a confidence vote in parliament on Friday.

"The market is rapidly running out of confidence that Greece will get its house in order, pronto," said Peter Kenny, managing director at Knight Capital Group. "There is real concern over this Greek referendum. This was an unexpected event that was nowhere on the horizon. And unexpected events are generally not well received by the market."

The Standard & Poor's 500-stock index sank 33 points, or 2.6%, to 1220. All 10 of the index's sectors fell, with financial stocks posting the biggest declines. Morgan Stanley slid 9%, Citigroup fell 7.5% and Goldman Sachs declined 5.1%.

The technology-heavy Nasdaq Composite fell 75 points, or 2.8%, to 2609.

Embattled Greek Prime Minister George Papandreou has called an emergency cabinet meeting for later Tuesday amid an open revolt in his Socialist party. Greek government officials have said voting for the referendum could deflate growing opposition against cuts in salaries, pensions and government spending. But a "no" vote could eventually propel Greece out of the euro.

"I don't think anyone realistically thought last week's solution was going to solve the whole problem," said David Kelly, chief market strategist for J.P. Morgan Funds. "The inability of European governments to make the right decisions is really what's holding the U.S. market hostage."

Concerns over economic growth also weighed on sentiment after data showed that the U.K.'s manufacturing sector contracted in October against expectations of slight expansion.

In Europe, the Stoxx Europe 600 was down 3.5%. Germany's DAX index tumbled 5%, while France's CAC-40 skidded 5.2%.

Asian bourses were mostly lower as well, with Japan's Nikkei Stock Average closing down 1.7% and Hong Kong's Hang Seng Index sliding 2.5%. A final reading on factory activity in China fell in October, but remained slightly above the expansion threshold.

Gold futures fell under $1,705 an ounce, while crude oil futures slid to around $90.50 a barrel. The U.S. dollar rose sharply against the euro but lost ground against the yen.

On the economic calendar, the U.S. manufacturing sector barely expanded last month, according to the Institute for Supply Management. The ISM's reading on manufacturing activity came in at 50.8, below economists' expectations. Readings above 50 typically indicate an expanding economy.

Spending on construction in the U.S. inched ahead 0.2% during September, which met economists' expectations. But the sector continues to struggle with weak demand for new projects.

Investors are also looking ahead to a reading on private-sector employment for October and the Federal Reserve's statement on monetary policy, both out on Wednesday. The government's key monthly jobs report is due on Friday.

In corporate news, Pfizer reported third-quarter results that exceeded expectations, lifted its full-year earnings and revenue outlook and increased its target amount for 2011 share repurchases. The blue-chip pharmaceutical company was the lone Dow gainer, rising 1.1%.

Elsewhere, Exelixis tumbled 40% after the company said it was launching a Phase-3 trial of its prostate cancer treatment even though it didn't have an agreement with the U.S. Food and Drug Administration over certain guidelines.

Baker Hughes gave up 8.5% after the oilfield-services company's third-quarter earnings rose sharply, but missed expectations.

CME Group reported third-quarter earnings that topped estimates but revenue fell a bit short of forecasts. Shares dropped 7.6%.

-By Steven Russolillo, Dow Jones Newswires; 212-416-2180; steven.russolillo@dowjones.com

(END) Dow Jones Newswires

November 01, 2011 12:56 ET (16:56 GMT)