Stocks slide broadly; Deutsche Bank worries hit other banks
U.S. stocks slumped Monday, and banks took the biggest losses. Deutsche Bank plunged as investors worried about the financial health of Germany’s largest bank. Pfizer pulled drugmakers down after it announced it won’t break up into two companies.
Stocks fell for the second day in a row. Banks were hurt by a drop in bond yields, which means lower interest rates and smaller profits on loans. Consumer companies fell as home improvement retailers were affected by a slowdown in sales of new homes.
European banks tumbled after the German magazine Focus said Deutsche Bank won’t get a government bailout if it asks for one. Its report, published Friday, cited “government circles” as its source.
“There’s some stress in the banking industry there, and questions about whether governments have the will to step in,” said Steve Chiavarone, associated portfolio manager for Federated Investors.
The Dow Jones industrial average sank 166.62 points, or 0.9%, to 18,094.83. The Standard & Poor’s 500 index tumbled 18.59 points, or 0.9%, to 2,146.10. The Nasdaq composite dropped 48.26 points, or 0.9%, to 5,257.49. Stocks are coming off two weeks of solid gains, and the Nasdaq set all-time highs twice last week.
Focus’ article also said the German government won’t help Deutsche Bank by intervening with U.S. officials who want the bank to pay $14 billion to end an investigation into its sale of mortgage-backed securities. The bank’s U.S.-listed shares tumbled 7.1% to $11.85. The stock is down 51% this year.
Other banks also dropped. Goldman Sachs took the largest loss among Dow stocks and sank 2.2% to $161.48. Citigroup sank 2.7% to $45.89.
Bond prices rose. The yield on the 10-year U.S. Treasury note fell to 1.58% from 1.62%. That also affects banks, as lower bond yields mean lower interest rates and smaller profits on lending.
Stocks overseas also weakened. The DAX in Germany dropped 2.2% and France’s CAC 40 sank 1.8%. In Britain, the FTSE 100 slid 1.3%. Japan’s benchmark Nikkei 225 lost 1.3%. South Korea’s Kospi slipped 0.3% and Hong Kong’s Hang Seng declined 1.7%.
Home Depot and Lowe’s sank after the government said sales of new homes went down sharply in August. Home Depot fell 1.8% to $125.45 and Lowe’s fell 2.1% to $70.81.
Pfizer, one of the world’s largest drug companies, slid 1.8% to $33.64 after it said it will not split into two smaller companies. Some of its investors had supported that plan in the hope it would bolster the value of their stock and accelerate growth, but lately the Viagra maker has been signaling that it probably wouldn’t break up.
Oil prices bounced higher as investors monitored a meeting of oil producers in Algeria. Benchmark U.S. crude rose $1.45, or 3.3%, to $45.93 a barrel. Brent crude, the international benchmark, rose $1.46, or 3.2%, to $47.35 a barrel. Oil exploration companies rose the most. Transocean climbed 4.6% to $9.52 and Noble Energy advanced 1.8% to $33.62.
Specialty chemicals maker Chemtura climbed 15.8% to $32.64 after it agreed to be bought by Germany’s Lanxess. Lanxess is paying $33.50 a share for Chemtura, a 19% premium, and the companies valued the deal at $2.5 billion.
Several companies started the week with deal news. CBOE Holdings, the parent company of the Chicago Board of Exchange, will buy stock exchange operator Bats Global Markets. The companies valued the deal at $3.2 billion, or $32.50 in cash and stock per share of Bats. Bats stock jumped 20% Friday as investors hoped that a deal was imminent, and it fell 4.6% to $30.35. CBOE stock sank 5.3% to $66.59.
Casual clothing retailer Lands’ End skidded 14.1% to $15.46 after the departure of its chief executive. Federica Marchionni left Dolce & Gabbana to join Lands’ End less than two years ago but was unable to stop a decline in sales.
The dollar slid to 100.34 yen from 101.09 yen. The euro rose to $1.1255 from $1.1231.
Gold rose $2.40 to $1,344.10 an ounce. Silver fell 21 cents to $19.60 an ounce. Copper stayed at $2.20 a pound.
Wholesale gasoline gained 3 cents to $1.40 a gallon. Heating oil rose 4 cents, or 3%, to $1.45 a gallon. Natural gas added 4 cents to $3 per 1,000 cubic feet.
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UPDATES:
3:20 p.m.: This article was updated with additional information.
1:50 p.m.: This article was updated with the close of markets.
7:45 a.m.: This article was updated with more recent prices and additional information.
This article was originally published at 7:05 a.m.
