US Stocks Fall As Investors Fret Over Proposed Greek Referendum

U.S. stocks tumbled, adding to stock-market losses around the world, as Greece's plans for a referendum fueled worries that the euro-zone bailout plan might fall apart.

The Dow Jones Industrial Average sank 230 points, or 1.9%, to 11724 in early trade Tuesday, led lower by Bank of America Corp.'s (BAC) 6.9% decline and J.P. Morgan Chase & Co.'s (JPM) 6.8% fall. The decline came after the blue-chip Dow slid 276 points on Monday, its biggest-point drop since late September.

"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."

Still, the Dow rose 1042 points, or 9.5%, in October, notching its biggest monthly point gain in its 115-year history and largest monthly percentage gain in nine years.

The Standard & Poor's 500-stock index early Monday sank 26 points, or 2.1%, to 1226. Energy, materials and financial stocks, which led the market higher last month, were Tuesday's biggest decliners. Morgan Stanley (MS) slid 7.3%, Citigroup Inc. (C) fell 6.1% and Goldman Sachs Group Inc. (GS) declined 3.7%.

The technology-heavy Nasdaq Composite fell 57 points, or 2.1%, to 2627.

Stock markets around the globe were sharply lower, with the Stoxx Europe 600 losing 3.6%. Greece said 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. Germany's DAX index tumbled 4.9%, while France's CAAC-40 fell 4.8%.

"The biggest mistake investors made in October was this illusion that any solution was going to be fast and efficient," said Jeffrey Sica, president and chief investment officer of Sica Wealth Management. "There's going to be a tremendous amount of pain implementing whatever ultimately comes out of this. This is going to be a long-term, painful problem. There isn't a quick-fix solution."

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

Asian bourses were mostly lower as well, with Japan's Nikkei Stock Average 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 to less than $1,698 a troy 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 Institute of Supply Management's reading on manufacturing activity in October came in at 50.8, which fell 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 nonfarm payroll report is due on Friday.

In corporate news, Pfizer Inc. (PFE) reported third-quarter results that exceeded expectations, lifted its full-year earnings and revenue outlook and increased its target amount for 2011 share repurchases. Shares of the blue-chip pharmaceutical company edged up 1%.

Elsewhere, Exelixis Inc. (EXEL) tumbled 38% 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 Inc. (BHI) gave up 11% after the oilfield-services company's third-quarter earnings rose sharply, but missed expectations.

CME Group Inc. (CME) reported third-quarter earnings that topped estimates but revenue fell short of forecasts. Shares dropped 4.5%.

-By Steven Russolillo, Dow Jones Newswires; 212-416-2180;

steven.russolillo@dowjones.com

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