Stocks sank Monday as a strong start to the December holiday shopping season failed to counter investor concerns that debt troubles would spread throughout Europe even as a final agreement was reached on Ireland's bailout fund.
The Dow Jones Industrial Average slid more than 125 points, falling below 11,000, after ending lower last week.
Hewlett-Packard, Home Depot , and Verizon were the top laggards on the Dow, while Bank of America and JPMorgan rose.
The S&P 500 and the Nasdaq also declined. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose to nearly 23.
All key S&P 500 sectors were lower, led by telecom, consumerdiscretionary and health care.
Over the weekend, European Union finance ministers crafted a $112.2 billion aid package package for Ireland and a plan to stem fears of a euro zone debt crisis. But investors continued to worry that debt troubles in Portugal and Spain could lead to similar bailouts in the future.
The euro slid nearly 1.4 percent against the U.S. dollar, as the dollar rose against a basket of currencies.
Those worries spilled over into the U.S. markets, countering a strong weekend of retail sales as the critical holiday shopping season got underway.
"Borrowing costs have risen again for European investors and that’s a pressing issue," said Nino Jimenez, head of trading for Brinson Patrick, an investment firm.
Also, while increased sales and foot traffic were encouraging, shoppers were drawn to stores by heavy discounting, which could hurt earnings, Jimenez said.
Moreover, with all the uncertainty in the world making markets jittery, "people are trying to take profits for the year and lock in some gains," he said. "They'd rather have realized gains than unrealized losses."
The market was expected to get a boost Monday from a 6.4 percent boost in retail sales on Black Friday from a year earlier, and the expectations of a spike in online retail sales for today—Cyber Monday. But spending by U.S. consumers failed to lift stocks overall, and for most retail names. Exceptions included Internet retailers Amazon.com and Overstock.com .eBay, however, fell after Stifel Nicolaus cut the online auction site to "hold" from "buy," on concerns it is losing market share to retailers like Amazon.com, that offer free shipping.
Apparel retailer American Eagle , meanwhile, rose after Janney Capital Markets raised the company to "buy" from "neutral," saying the retailer would likely increase earnings-per-share. Rivals were mixed, as Pac Sunwear and Zumiez rose, and Abercrombie & Fitch and J Crew slumped.
Personal computer companies felt pressure from news that Gartner cuts forecasts for global computer shipments for this year and next, citing the rise of tablet slaes. Gartner said PC shipment would rise 14.3 percent in 2010, and 15.9 percent in 2011, down from earlier growth forecasts of 17.9 percent in 2010 and 18.1 percent in 2011.
Dell , IBM , and Apple all sank in addition to HP.
In corporate news, Wal-Mart is purchasing a controlling stake in South African discount retailerMassmart for $2.3 billion. And BP agreed to sell its 60 percent stake in Pan American Energy for $7 billion.
Pharmaceutical company Amarin said its lead drug candidate to cut triglyceride levels was working in late-stage tests aimed at not raising so-called "bad" cholesterol levels. Shares rose nearly 20 percent in premarket trading.
United Healthcare's shares fell after news the health insurer expects profits to fall 8 percent next year. The adjusted forecast, however, was better than some analysts had feared.
And Starbucks has accused Kraft of mismanaging sales of its packaged coffee in grocery stores. Starbucks may want to end its 12-year partnership with Kraft, documents quoted by Reuters show.
Stillwater Mining slumped after news Norimet, a unit of Norilsk Nickel Mining & Metallurgical, plans to sell at least 37 million shares of the company, which produces platinum and palladium and other metals. Norimet owns 55.5 stake in Stillwater.
European stocks didn't receive a boost from the news either, as the major indexes struggled to find positive territory after opening higher. Asian stocks ended mostly higher, but geopolitical tensions in Korea still rattled investors.
China called for emergency talks to end the standoff in the region after North Korea fired artillery at an Island in South Korea last week causing fatalities and widespread condemnationMeanwhile, Congress returns to work with expiring Bush-era tax cuts likely to be high on the discussion agenda.
On Tap This Week:
MONDAY: Texas manufacturing outlook survey, Chicago Fed Midwest manufacturing index, St. Louis Fed Pres Bullard speaks, Cyber Monday
TUESDAY: ISM-NY report on business, S&P/Case-Shiller home price index, consumer confidence, Minnesota Fed Pres Kocherlakota speaks, Bernanke speaks, Obama meets with Congressional leaders
WEDNESDAY: Auto sales, MBA mortgage applications, Challenger job-cut report, ADP employment report, productivity and costs, ISM mfg index, construction spending, oil inventories, Beige Book, Fed vice chair Yellen speaks
THURSDAY: ECB announcement, jobless claims, pending home sales, Philadelphia Fed Pres Plosser speaks, Fed Gov. Duke speaks, chain-store sales; Earnings from Toll Brothers, Del Monte and Kroger
FRIDAY: Employment situation, factory orders, ISM non-mfg index
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