Dow Jones average continues a two-week slide
Europe's latest political impasse cast a gloom over financial markets Tuesday. The euro plunged, and the Dow Jones industrial average extended a slide that has wiped out nearly 5 percent of its value in two weeks.
The biggest action of the day came shortly before U.S. markets opened, when a Greek party leader announced the talks to build a coalition government had failed. The euro and major European stock markets turned sharply lower and stayed there the rest of the day.
Newly elected political leaders in Greece disagree about whether to accept more international bailouts and continue with painful spending cuts. If Greece exits the euro currency, it could rattle financial markets around the world.
In the U.S., stocks opened mixed and then staged a weak, mid-morning rally after word that confidence among U.S. builders rose to a five-year high in May. Homebuilders gained: Hovnanian Enterprises surged 10 percent, Lennar Corp. 3 percent and PulteGroup Inc. 2 percent.
The Dow and other stock indexes meandered between gains and losses for much of the day, then turned decisively lower in the last hour of trading.
The Dow wound up with a loss of 63.35 points, or 0.5 percent, to close at 12,632. Losses by most of its components were offset by a big gain for JPMorgan Chase. The nation's biggest bank rose 1.3 percent, recovering some of the losses it has sustained since revealing a $2 billion trading loss last week.
The Dow has lost 647 points, or 4.9 percent, since May 1, when it hit a four-year high of 13,279.32. In that time it has fallen every day but one. The Dow is on track for its first monthly decline since September, when it fell 6 percent.
The Standard & Poor's 500 index finished down 7.69 points, or 0.6 percent, at 1,330.66. The Nasdaq composite index fell 8.82, or 0.3 percent, to 2,893.76.
The euro fell as low as $1.2720, a four-month low against the dollar, after Greek socialist leader Evangelos Venizelos declared that attempts to form a governing coalition there had failed and new elections will be held next month.
Aside from fears about Europe, stocks are suffering because a string of weaker economic data has dimmed hopes for corporate profits in the current quarter ending June 30, said John Butters, senior earnings analyst at FactSet, a financial data provider.
For the first month of the quarter, as earnings came in strong and stocks rose, analysts' expectations for second-quarter earnings growth held steady at 6 percent, Butters said. In the two weeks since, as the U.S. economy appeared to soften and Europe's problems reemerged, he said, analysts cut their estimates for S&P 500 earnings growth to 5 percent.
Analysts expect earnings to decline this quarter for half of the 10 industry groups in the S&P 500, Butters said. He said many expect a strong rebound in the fourth quarter as demand returns in emerging markets like China and India.
Among other stocks making big moves:
— Home Depot slumped 2.4 percent after the world's biggest home-improvement company forecast revenue that was below what Wall Street analysts were expecting.
— TJX Cos., which owns the T.J. Maxx, Marshalls and HomeGoods store chains, shot up 6.9 percent, the most in the S&P 500 index. The discount retailer reported a 58 percent surge in first-quarter income and raised its full-year profit forecast.
— Avon Products Inc. fell 9.7 percent, the most in the S&P 500 index, after perfume marketer Coty Inc. canceled its unsolicited, $10.7 billion bid for the cosmetics retailer.
— Groupon rose 3.7 percent after the online daily discount site reported first-quarter revenue that exceeded analysts' expectations.
Daniel Wagner can be reached at www.twitter.com/wagnerreports.