US Stocks Tumble Into the Close As European Summit Opens; DJIA Loses 199

U.S. stocks fell, tumbling into the close, after a summit that could help stem Europe's economic turmoil got off to a rocky start and the European Central Bank declined to enact aggressive new bond purchases.

The Dow Jones Industrial Average lost 198.67 points, or 1.6%, to 11997.70, on Thursday, snapping a three-day winning streak and turning negative for the month amid a raft of reports out of Europe. The Standard & Poor's 500-stock index shed 26.66 points, or 2.1%, to 1234.35, while the Nasdaq Composite declined 52.83 points, or 2%, to 2596.38.

The European Central Bank cut its key lending rate to 1% from 1.25% but opted against increased government-bond purchases, sending stock futures lower. ECB President Mario Draghi called the bank's government-debt purchases "neither infinite nor eternal."

Stocks tumbled further late in the session amid reports that Germany may oppose key aspects of the summit's draft agreement, such as issuing a banking license for a bailout fund. The trickle of reports suggesting an acrimonious start to the summit was a disappointment to investors, who have looked to the gathering in hopes of more substantial efforts to combat the sovereign-debt crisis.

"People are stressed out with all this news from Europe," said Alan Valdes, director of floor trading at DME Securities. "[They're] afraid that whatever comes out in the overnight is not going to be good. It's going to add more fuel to the fire."

Financial stocks fell the hardest, with the S&P 500's financial components losing 3.7%. J.P. Morgan Chase lost $1.78, or 5.2%, to 32.22, and Bank of America shed 30 cents, or 5.1%, to 5.59, leading the Dow's decliners. Morgan Stanley was the weakest stock in the S&P 500, losing 1.46, or 8.4%, to 15.88. Citigroup was another outsized decliner as it shed 2.08, or 7%, to 27.75.

"The expectations are ahead of the reality," said Jim Russell, regional investment manager for U.S. Bank. "We have seen the markets buy into optimistic statements on the resolution of this crisis, only to be disappointed."

European markets also declined. The Stoxx Europe 600 finished with a 1.5% loss, Germany's DAX shed 2% and France's CAC 40 slumped 2.5%. Asian bourses fell, with Japan's Nikkei Stock Average losing 0.7%.

The news from Europe overshadowed a favorable U.S. employment report showing that the number of U.S. workers filing new applications for unemployment benefits fell to the lowest level in nine months.

Demand for U.S. Treasury bonds rose, driving yield on the 10-year note down to 1.972%. Bonds prices move inversely to their yields. Oil prices slumped 2.1%, to $98.34 a barrel, the second straight loss. Gold futures settled down 1.8%, at $1,709.80 a troy ounce. The dollar gained versus the euro and the Japanese yen.

McDonald's was the only Dow stock to advance, gaining 47 cents, or 0.5%, to 96.92. The fast-food company's global same-store sales jumped a greater-than-expected 7.4% in November thanks to expanding premium and midtier products in Europe and adding Peppermint Mocha to the McCafe line-up in the U.S.

Costco Wholesale shed 1.71, or 2%, to 85.76, after the wholesale club reported fiscal first-quarter earnings that rose just 2.6% despite a double-digit-percentage increase in sales because of rising costs.

Affymax soared 2.12, or 36%, to 7.98, after its dialysis treatment received a favorable vote from the Food and Drug Administration.

Ciena climbed 12 cents, or 1%, to 12.03, after the network gear maker's fourth-quarter loss narrowed amid a jump in revenue in high-margin packet-optical switching.

Pacific Sunwear gained 14 cents, or 10%, to 1.49, after the company said it planned to close up to 200 stores in the coming 14 months and hoped to seek aid from a private-equity firm experienced with ailing retailers.

Apparel maker G-III surged 3.66, or 18%, to 24.02, after unveiling a deal with PVH's Calvin Klein to open women's sports apparel stores in the U.S. and China, which overshadowed a lower-than-expected gain in quarterly profits and lower full-year earnings projection.

THQ slumped 56 cents, or 38%, to 90 cents, after the videogame publisher cut its fiscal third-quarter revenue outlook 25% and its full-year earnings view.

-By Brendan Conway, Dow Jones Newswires; (212) 416-2670; brendan.conway@dowjones.com

G III Apparel (NASDAQ:GIII)
Historical Stock Chart
From May 2024 to Jun 2024