Stocks sink on possible Greece debt default

Dow Jones:10,992.13 (–303.68) Nasdaq:2,467.99 (–61.15) S&P 500:1,154.23 (–31.67)

US STOCKS fell yesterday, erasing the weekly gain for the Standard and Poor’s 500 Index, on speculation Greece could default on its debt and deepen an economic slowdown.

Financial stocks tumbled as Germany set plans to shore up the nation’s banks in the event Greece defaults, three coalition officials said.

The Dow Jones industrial average dropped 303.68 points, or 2.69 per cent, to 10,992.13.

The Standard & Poor’s 500 Index fell 31.67 points, or 2.67 per cent, to 1,154.23.

The Nasdaq Composite Index slid 61.15 points, or 2.42 per cent, to 2,467.99.

“We’re dealing with a confidence crisis,” Matt McCormick, a money manager at Cincinnati-based Bahl and Gaynor, which oversees $4 billion, said. “You look at the possibility of a Greek default. Investors are making a decision now that they don’t want to be long over the weekend. A lot of people think that Germany will pull out a rabbit from the hat and fix Greece. Germany is fighting its own issues. It cannot be the sugar daddy for all of Europe.”

The S&P 500 has fallen as much as 18 per cent from a three- year high at the end of April on concern about Europe’s debt crisis and an economic slowdown.

Questions over Greece’s ability to meet the terms of its rescue package are dogging the nation as bond holders weigh whether to participate in a debt exchange that’s crucial to a second bailout. The nation is seeking preliminary responses from bond investors to the proposed swap. Greece has no plans to publish details of anticipated participation in its debt-swap program this week or next, said Petros Christodoulou, head of the country’s debt management office.

Greece is committed to “full implementation” of its bailout agreement, the country’s finance ministry said in a statement.

JPMorgan declined 4.4 per cent to $32.05. Citigroup fell 4.3 per cent to $26.77.

Chevron lost 3.4 per cent to $95.02. Alcoa retreated 4 per cent to $11.55.

McDonald’s, the world’s largest restaurant chain, fell 4.4 per cent to $84.68. Sales at stores open 13 months or more rose 3.5 per cent in August, the Oak Brook, Illinois-based company said. – (Bloomberg/Reuters)