Stocks were dragged down by tumult over the Greek bailout, disappointing readings on the U.S. economy and a downgrade of nearly three dozen Italian banks.
Dow ends down 0.7%: Stocks drop on Greek deal holdup-From USA Today
Stocks fell sharply Friday after Greece's bailout deal was put on hold, a day after it seemed that the country had satisfied its creditors.
The Dow Jones industrial average, the broader Standard & Poor's 500 index and the Nasdaq composite index all closed down 0.7% or more.
The Dow lost 89 points, settling at 12,801, while the S&P 500 slid 9 to 1,343 and the Nasdaq lost 23, ending at 2,904.
Investors had breathed a sigh of relief Thursday after Greek Prime Minister Lucas Papademos and the heads of the three parties backing his government agreed to private-sector wage cuts, civil service layoffs and cuts in government spending.
But finance ministers from the other 16 countries that use the euro insisted that Greece save an extra €325 million ($430 million), pass the cuts through parliament and guarantee that they will be enforced after planned elections in April.
Greece needs another round of international bailout money, its second, to avoid missing a bond payment next month and defaulting, an event that could cause a shock in world financial markets.
By Friday, four Greek cabinet ministers had resigned over the wage cuts and spending reductions, known as austerity measures.
"The economy in Greece is deteriorating faster than anticipated, and the austerity measures aren't particularly popular," said Mark Luschini, chief investment analyst at Janney Montgomery Scott.
"There could be a disorderly default."
The decline in U.S. stocks was broad. All 10 categories of stocks in the S&P 500 were down, led by materials companies, down 1.8%. Industrial, energy and financial companies eacj fell 1%.
Stocks have been generally rising on small daily gains this year because of good economic news and a hopeful sense that the worst of the debt crisis in Europe may be over. Before today, the Dow had risen 4.5% year-to-date. Its last loss of 100 points or more points was Dec. 28, 2011.
In Europe, the Greek benchmark index in Athens fell 3.2%. Germany's DAX was down 1.6%. The CAC-40 in France was down 1.3%. The FTSE 100 index of leading British shares was down 0.8% at 5,851.
The euro, which had risen Thursday to its highest level against the dollar in two months, fell by a penny and was trading at just under $1.32. U.S. Treasury yields fell, a sign that investors were buying bonds as a safer investment than stocks.
The prevailing view remains that a deal will be made, but the uncertainty about when or how is weighing on stocks.
Earlier in Asia, Japan's Nikkei 225 index fell 0.6% to close at 8,947.17. Hong Kong's Hang Seng lost 1.1% to 20,783.86 and South Korea's Kospi dropped 1% to 1,993.71.
However, mainland Chinese shares edged higher with the benchmark Shanghai Composite Index gaining 0.1% to 2,351.98. The Shenzhen Composite Index also gained 0.5% to 903.64.
Oil prices tracked the bulk of equities around the world lower — benchmark oil was down $1.08 to $99.27 per barrel in electronic trading on the New York Mercantile Exchange.
2) Top financial story of the day:
Americans felt worse about their personal finances in early February, even as they saw a light at the end of the tunnel for the jobs market.
Consumer mood worsens in February on income worries-From Reuters
Americans felt worse about their personal finances in early February, even as they saw a light at the end of the tunnel for the jobs market, a survey released on Friday showed.
The Thomson Reuters/University of Michigan overall index of consumer sentiment fell to 72.5 in early February from January's 75.0, which was the highest level since February 2011.
The latest figure fell short of the median forecast of 74.5 among economists polled by Reuters.
"This pattern of responses - less favorable current assessments and more favorable prospects - is not surprising. It simply indicates that consumers find their current situation all the harder to bear when improvement is finally in sight," said survey director Richard Curtin said in a statement.
An improving financial situation was reported by just 23 percent of all consumers surveyed in early February, down from 29 percent in January and last year's 30 percent.
One in four families reported declines in income in the early February survey, even as official data have shown overall U.S. income growing since last August, albeit at a slow pace.
A separate survey released in late January by the Conference Board also indicated a pullback in consumer optimism partly because of income jitters.
Angst about income did not derail expectations of a moderate 2.2-percent increase in U.S. consumer spending this year, Curtin said.
The consumer sector accounts for about two-thirds of U.S. economic activity.
Financial markets did not react to the pullback in consumer confidence. Wall Street stocks fell on fears Greece might not receive a bailout to avoid a messy default, while the dollar and U.S. Treasuries were higher.
"Overall, the souring in household moods in February is somewhat at odds with the improvements seen in labor market conditions and the economic recovery more generally in recent months.
However, when seen in the context of the sustained gains since August, the modest pullback in confidence not may not be that surprising, after all," said Millan Mulraine, senior macro strategist at TD Securities in a research note.
While more households worried about shrinking paychecks, they reported a record level of optimism about job prospects. Last week, the U.S. Labor Department said the monthly jobless rate fell to 8.3 percent in January, a near three-year low.
"More consumers spontaneously mentioned hearing about increases in employment and job opportunities than ever before recorded in the long history of the surveys," Curtin said, adding that positive reports of job growth set a record in early February.
The survey's barometer of current economic conditions fell to 79.6 in early February from 84.2 in January. Analysts had expected a figure of 84.5.
The gauge of consumer expectations dipped to 68.0 from 69.1. January's figure was the highest level since May 2011 and for February, analysts had predicted an even higher reading of 69.5.
In an uncertain economic climate, consumers shaved their short-term inflation outlook, but raised their expectations on long-term inflation.
The survey's expectations for one-year inflation slipped to 3.2 percent from 3.3 percent in January, while the survey's five-to-10-year inflation outlook rose to 2.9 percent, matching the level set a year ago, from 2.7 percent in the previous four months.
3) Mackay’s Moral:
Respect your deadlines or your customers will reject your company
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