Stocks Lower As Closing Bell Nears; Oracle Gains

Stocks fell Tuesday as the Dow and the S&P 500 were on pace to end a four-day winning streak amid renewed concerns about the European banking sector and light post-holiday trading.

TheDow Jones Industrial Averagewas down more than 80 points, with American Express, AIG , and Walt Disney leading the blue-chips lower. McDonald's and Altria rose.

The S&P 500and the Nasdaqwere also lower. The CBOE Volatility Index, the most widely followed gauge of fear in the market, soared above 10 percent to trade above 23.

All key S&P sectors were down throughout the session, with financials, consumer discretionary, and energy stocksleading the way.

The grimmer sentiment comes after stocks capped a strong start to Septemberfollowing better-than-expected jobs and manufacturing reports, and at the start of a week light on economic data.

"We're in a trading range, but this is a holiday-shortened week," Steve Grasso, director of institutional sales at Stuart Frankel said on CNBC. "I want to see real conviction and it will take us another two weeks [where] we're going to get a lot more people on their desks than today."

Volume often starts to pick back up after Labor Day when traders return from summer vacations.

Financials as a group were almost all lower after The Wall Street Journal reported that European bank stress tests were not as comprehensive as they should have been, and some banks hold riskier portfolios than thought.

Banks may also be affected by rumors reported in the German weekly Die Ziet that the Basel committee will require banks to hold 9 percent Tier 1 capital, up from 4 percent. Higher capital levels would put more pressure on big banks.

While these factors were bringing the whole sector down Tuesday, bank stocks have led the market higher as well as lower since the financial crisis, said Frederick Cannon, chief equity strategist at Keefe, Bruyette, & Woods.

Traditionally, financials were "fairly stable stocks," in part because they paid good dividends, Cannon said. That's no longer the case, and financials have tended to be volatile, he said.

Bank stocks were mostly in the red, with giants Citigroup , JPMorgan and Wells Fargo down more than 2 percent each.

Barclays said the head of its investment bank, Bob Diamond, would be its next chief executive. Shares of the bank tumbled almost 6 percent.

And HSBC Holdings Chairman Stephen Green is stepping down to become U.K. Trade Minister of State for Trade and Investment, a post vacant since last May. Green's replacement has not been named.

AIG slipped more than 2 percent after the insurer said it hopes to raise about $15 billion for its Asian life insurance unit, and is seeking approval from a Hong Kong committeeto list its initial public offering for sale on Sept. 21, according to Reuters. The move will allow AIG to repay taxpayers for propping up the insurance giant during the financial crisis.

Mining and minerals stocks were under pressure following news that authorities in China have asked several steel companies to suspend production for several days to ease energy use concerns in the country, said Schrader at Stifel Nicolaus.

"I'm not saying it's 100 percent due to the news in China, but a significant portion," said Tom Schrader, managing director for U.S. Equity trading at Stifel Nicolaus Capital Markets. "The strong dollar is also hurting commodity plays."

Cliff Natural Resources and Cameco both fell. But U.S. steelmakers appeared to benefit from the news with Nucor , U.S. Steel and AK Steel advancing.

Gold rose above $1,257 an ounce— its highest since late June — as investors bought the metal as a safe haven play. Meanwhile, oil fell 0.7 percent to $74 a barrel.

Schlumberger fell slightly after Goldman Sachs added the oil services firm to its buy list with a price target of $68.

Meanwhile, Oracle jumped more than 5 percent, the best performance on the S&P and Nasdaq, after the multinational computer tech giant hired the former chief executive of Hewlett-Packard , Mark Hurd as president. HP countered by suing Hurd, who resigned a month ago over irregular expense accounts.

Apple shares were flat after the iPod maker said its new social music network, Ping, saw more than a million users in the two daysafter it launched last Wednesday.

The U.S. Justice department is examining whether Google would have too much influence in online travel with the purchase of ITA Software, an airline ticketing software firm, according to The Wall Street Journal. Google bought ITA Software for $700 million in July.

In addition, Google will launch a new Web TV servicethis fall, said Eric Schmidt after his keynote speech to the IFA consumer electronics trade fairin Berlin.

Applied Materials was down more than 2 percent after Barclays cut the company's price target to $10 from $14.

In merger and acquisition news, Air Productsboosted its hostile, all-cash offerfor for Airgas to $65.50 a share, a $5.5 billion deal. On Sept. 15, Airgas will vote on 3 director slots up for election on the 9-member board.

And Boeing's head of defense said the aircraft maker is "actively" looking at possible acquisitions and won't rule out a merger with another large defense contractor.

Playboy Enterprises shares were lower after a special board committee said it retained Raine Securities as a financial advisor and Kaye Scholer as a legal advisor to take the company private. The committee is weighing founder Hugh Hefner's bid to buy Playboy shares he does not own for $5.50 a share.

Treasurys rebounded following three straight losing sessions after the government auctioned $33 billion of 3-year notes, which had a high yield of 0.790 percent and a bid-to-cover of 3.21.

Auctions of 10-year notes and 30-year bonds are expected on Wednesday and Thursday, respectively.

During the Labor Day break, President Barack Obama unveiled a $50 billion investment package to encourage job creation with projects for improving roads, railways and airport runways. Obama is expected to announce further measures during the week in a bid to boost confidence in the economic recovery ahead of the mid-term elections. The announcement, while a potential boon to the economy, had little effect on stocks.

The key economic news this week will be the "beige book" report from the Federal Reserve on Wednesday and weekly unemployment numbers due out on Thursday.

Coming Up This Week:
WEDNESDAY: MBA mortgage applications, 10-year note auction, Fed Beige Book release, Fed's Kocherlakota speaks, consumer credit; Earnings from Smithfield Foods
THURSDAY: New York Fashion Week begins, McDonald's August sales, weekly jobless claims, oil inventories, 30-year Treasury bond auction
FRIDAY: Wholesale trade

More From CNBC.com: