NEW YORK – U.S. stocks fell sharply on Monday, leaving the S & P 500 just above the breakeven point so far this month. This is in-line with the predictions made by investors that very little should be expected this week as the European summit is set to begin in Brussels by Thursday.
The market remained sensitive to news from Europe since the tailspin of debt in the region could cause more damage to a slowed economy.
Shares of financial and energy sectors were among the companies that were behind in the market.
U.S. crude futures lost by 0.7% which continues its near eight-month low hit. The news that Spain had sought help for their banks put pressure on businesses in the financial sector.
The PHLX index of the financial services sector lost 3.4%, and the KBW bank index fell 2.7%.
The expectations for the two-day summit of the European Union are low. This is after Germany refused to join the EU and the flexible use of bailout funds in Europe at a meeting of the four largest economies in the region.
“Last week, we were very hopeful that they would move and that the meetings this week would have a positive ending. Today there is little doubt that the EU summit will generate something substantial,” said Gail Dudack, chief investment strategist of the Dudack Research Group in New York.
The Dow Jones industrial average fell 137.97 points or 1.09% to close at 12,502.81 points. Meanwhile, the Standard & Poor’s 500 index fell 21.30 points, or 1.60%, to 1313.72.
On the other hand, the Nasdaq Composite fell 56.26 points, or 1.95%, to 2836.16.
So far this month, the Dow rose by 0.88% while the S & P 500 advanced 0.26%. The Nasdaq accumulated a rise of 0.31%.
The austerity measures driven by Germany have plunged Greece into a long recession. Investors fear that Spain may be the next victim as their borrowing costs remain stubbornly high. Spain formally requested bailout loans from the Eurozone that amounted to almost €100EUR billion ($125 billion) to recapitalize its banks, saying the final figure will be set later. Some economists say it is simply a prelude to the total surrender of Spain.
An index of European shares fell by 1.6% and the dollar, seen as a safe haven to the volatility of European markets, was seen as fears about global growth persist after weak manufacturing data last week around the world.
The market barely reacted to data showing an increase in May sales for new homes for families in America. The Commerce Department said that sales climbed 7.6% to a seasonally adjusted annual rate of 369,000 units last Monday, the highest since April 2010.