US stocks fall sharply

US stocks opened sharply lower amid fresh fears about the global economy.

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US stocks opened sharply lower Monday amid fresh fears about the global economy.

The Dow Jones industrial average fell 144 points, or 1.1 percent, to 12,513, at the start of trading. The Standard & Poor's 500 index fell 19, or 1.4 percent, to 1,324. Every industry group in the S&P 500 fell.

The Nasdaq composite fell 36, or 1.3 percent, to 2,824.

Greece is expected to receive a second financial rescue package to help the country avoid a default on its debts. But there are growing concerns that the debt crisis is spreading to larger countries like Italy and Spain. Spain is Europe's fourth largest economy. Already, bond yields for the two countries have risen sharply.

Italy's largest banks, UniCredit SpA and Intesa, fell sharply Friday, sparking fears that even aid from international lenders may not be enough to stop a broad deterioration of the European economy.

“What the European Union is trying to do is keep the problem contained at a sovereign level and not have the infection spread to the banking system,” said Jack Ablin, chief investment officer at Harris Private Bank. “To see a bank drop that much, that fast suggests there may be a breach.”

Some investors believe some of Italy and Spain's financial institutions might not pass a Friday stress-test for European banks.

The European debt issues follow disappointing US employment news and a setback in negotiations over the country's debt limit.

A government report Friday saying the economy created far fewer jobs than expected in June compounded fears that the US economy was in even worse shape than previously thought. The unemployment rate rose to 9.2 percent. Weekend budget talks between Republicans and Democrats stalled, raising the possibility that the US might reach its debt limit before a deal to raise that ceiling and make spending cuts is in place. That could mean the government might miss a debt payment for the first time in history, although it's more likely other payments, like social security or military pay, would be skipped first.

News Corp. fell 5 percent, the most of any company in the S&P 500, as its phone hacking scandal threatened the approval of a proposed takeover of British Sky Broadcasting.

Wells Fargo fell 1.3 percent after the bank offered to settle for $125 million with pension funds that accused it of not warning investors about risky mortgage-backed securities.

Semiconductor company KLA-Tencor Corp. was one of the few stocks that rose, jumping 3 percent and the most of any S&P 500 stock days after an analyst upgrade. UBS analyst Steven Chin raised the company's rating to “Buy” from “Neutral,” saying its business would pick up next year.

Insurance giant AIG fell 1.5 percent after announcing it would fire one or more of the bankers it used for its recent public stock offering when it sells more stock later this year.

Aluminum maker Alcoa announces its second-quarter results after the end of trading, marking the unofficial beginning of US earnings season. Aluminum is used in everything from airplanes to beer cans, so the company's results typically offer insight into the health of the broader US economy. - Sapa-AP

Source: http://www.iol.co.za/us-stocks-fall-sharply-1.1097087

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