U.S. Stocks Tumble Amid Doubts About Europe Summit
06/25/2012| 02:39pm US/Eastern
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--Stocks fall amid concerns about Spain aid request, European Union summit
--Data on new home sales, Dallas-area activity upbeat
--Overseas markets decline
By Matt Jarzemsky and Kaitlyn Kiernan
NEW YORK--U.S. stocks extended last week's decline as skepticism about an upcoming meeting of European leaders outweighed upbeat domestic data on housing and manufacturing.
The Dow Jones Industrial Average slipped 147 points, or 1.2%, to 12494 in mid-afternoon trade. The blue-chip benchmark rose Friday, but capped its first weekly decline in three weeks after a parade of sluggish economic data.
The Standard & Poor's 500 stock index dropped 22 points, or 1.6%, to 1313. Energy and financial shares led declines across all 10 of the index's sectors, though defensive stocks such as utilities performed relatively better. The Nasdaq Composite retreated 55 points, or 1.9%, to 2838.
"Everyone's worried that the EU meeting this week is going to produce no results," said Frank Ingarra, head trader at NorthCoast Asset Management. "My gut is telling me that Europe is not going to be solved this week. There's not really any up-move catalyst."
European leaders are expected to take up issues such as potential renegotiation of Greece's bailout terms and proposals to create a fiscal and banking union at a summit Thursday and Friday. But questions remained about the group's ability to fix the region's troubles and worrisome headlines from Europe continued to mount.
Investors took a skeptical view of a Spanish request for EU aid to bail out its banks. The country made its formal request for bank aid, but details about the plan, including the specific sum it would involve, remain unclear.
Greece's new finance minister, who suffered stomach problems that led him to be hospitalized Friday, will resign, the prime minister's office said. Meanwhile, the prime minister is recovering from eye surgery and won't be able to attend the European Union summit.
Fitch Ratings downgraded Cyprus's government debt rating to junk status and warned of further cuts to come.
The Stoxx Europe 600 fell 1.5%. Spain's IBEX 35 tumbled 3.7%. Greece's ASE Composite index retreated 6.8%.
"The overseas markets were soft when that Spain news came out and got a little worse as the morning went on," said David Bellantonio, managing director at electronic brokerage Instinet. "It's a very much wait-and-see market. It's not like they're selling aggressively, but no one's buying either."
Better-than-expected mid-morning data was not enough to lift stocks. New single-family home sales in May grew by 7.6% from April to a seasonally adjusted annual rate of 369,000, the highest rate in more than two years, the Commerce Department said.
The Federal Reserve Bank of Dallas reported that business activity in the region jumped this month. The bank said its general business activity index for June came in at 5.8, from the prior month's -5.1. The production index surged to 15.5 from 5.5.
Asian markets slid, with the Shanghai Composite down 1.6% and Japan's Nikkei average dropping 0.7% amid doubts that there will be a major breakthrough at the European summit.
Bristol-Myers Squibb slid 3.9% and Pfizer fell 1.4% after announcing the U.S. Food and Drug Administration has requested more information on their anti-clotting drug Eliquis, pushing back the potential for U.S. sales of the drug, which is already approved in Europe.
Teva Pharmaceutical jumped 4.4% after a U.S. District Court validated patents for multiple sclerosis treatment Copaxone, the company's best-selling drug. Mylan 2.1% fell and Momenta plunged 22% as the court found those drug maker's purported generic versions of Copaxone infringe the patents.
Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com
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