US Stocks Slide on Economic Tremors from Europe

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NEW YORK - A collection of worrying news out of Europe sent stocks sharply lower on Monday.

New reports showed that European government debt continues to pile up despite severe budget cuts, which have led to unrest across the continent. The government of Holland collapsed Monday and French President Nicolas Sarkozy lost the first round of the country's presidential election to a Socialist candidate.

The Dow Jones industrial average dropped 148 points to 12,880 as of 2 p.m. in New York, following steep declines in Europe. The euro fell against the dollar, oil prices sank and U.S. Treasury prices edged higher.

"The main concern today is the stability of the euro zone as a whole," said Dan Greenhaus, chief global strategist at the brokerage BTIG.

Figures reported by the European Union's statistics office confirmed the effects of budget-cutting programs on countries that use the euro currency. Even with widespread spending cuts, overall debt rose to 87.2 percent, the highest level since the euro was created. Separately, a survey of the euro zone's manufacturing and services sectors unexpectedly fell in April.

In France, Sarkozy came in second behind Francois Hollande, a harsh critic of the spending cuts prescribed as a way to end the region's debt crisis. Sarkozy and Germany's Chancellor Angela Merkel have been the main architects of Europe's efforts to avoid a collapse of the region's shared currency.

"To the extent that Europe has any leaders, it's very much Merkel and Sarkozy," Greenhaus said. "If Sarkozy were to lose, you'd change the leadership of Europe at arguably the worst possible time."

Europe's major stock markets plunged. France's CAC-40 index dropped 2.8 percent. Germany's main index lost even more, 3.4 percent.

In the U.S., the Standard & Poor's 500 index lost 15 points to 1,363. The Nasdaq composite fell 38 points to 2,962.

Traders shifted money into Treasurys on Monday. The price of the 10-year Treasury note rose, pushing its yield down to 1.92 percent from 1.96 percent late Friday.

David Kelly, chief market strategist at J.P. Morgan Funds, said it looks like investors are looking for a reason to take profits after stocks soared in the first three months of the year. The S&P 500 index rose 12 percent in the first quarter, its best start since 1998. Many investors Kelly talks to see no reason for the market to push higher.

"There's a complete lack of enthusiasm," he said. "And it's making stocks cheap and bonds expensive."

Concerns over Europe pushed the price of oil down nearly 2 percent Monday. Benchmark West Texas Intermediate crude dropped $1.68 to $102.18 per barrel in New York.

Europe's slowing economy also hurt Kellogg Co. The food giant slashed its full-year profit forecast, blaming weak sales in the U.S. and Europe. Kellogg's stock dropped 5.5 percent.

Among other stocks making big moves:

- Wal-Mart Stores sank 4.8 percent following a report in The New York Times about an alleged bribery campaign involving top executives at a Mexican subsidiary. The retailer said it was investigating for any breach of the U.S Foreign Corrupt Practices Act.

- Hasbro dropped 5.7 percent after posting a first-quarter loss on falling sales and costs tied to cutting jobs. Weak sales of "My Littlest Pet Shop" miniatures and other girl's toys were partly to blame.

-SunTrust Banks rose 3.4 percent, the biggest gain in the S&P 500 index. SunTrust reported quarterly earnings that beat analysts' estimates as fewer loans went bad. The regional bank also made more mortgage and commercial loans.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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