The decline extended Friday’s steep drop that wiped out the Dow industrials’ gain for the year, although additional declines may lack intensity after indexes fell below key technical support levels. Signs of economic weakness around the globe and Europe’s intensifying debt crisis are rattled investors, who have been piling out of riskier investments like commodities and equities for the perceived safety of higher-rated government bonds.
The S&P 500 dropped 2.5 percent on Friday, its biggest drop since November 9, with economically sensitive sectors such as banks and energy among the hardest hit, reflecting investor sentiment on the stability of the global economy.
The declines on Friday pushed the S&P 500 below its 200-day moving average, seen as a key support level. The benchmark index is on track for its fourth straight session of declines.
U.S. banking stocks are heading into a bear market as Europe’s debt crisis pressures the sector. The KBW Bank index .BKX, which measures the performance of 24 U.S. banks, is down more than 17 percent from its intraday high in March. The index was down 2.1 percent by noon (1600 GMT).
Morgan Stanley (MS.N) has come under pressure as bond markets treat the bank as a junk-rated company, and the higher borrowing costs could already be putting it at a disadvantage even before an expected ratings downgrade. The bank’s stock is off 41.4 percent since late March, and was down 3.5 percent to $12.29. “Things are stabilizing in and around here – they will stabilize and certainly not decrease with the same velocity that we’ve seen recently,” said Rick Bensignor, chief market strategist at Merlin Securities in New York. “It doesn’t mean we are done going down but in and around here you can kind of consolidate somewhat.” Shares of social networking company Facebook Inc continued to struggle, hitting a new low of $26.57 since its debut a bit more than two weeks ago. The stock was lately down 68 cents to $27.03, down 2.4 percent.
The Dow Jones industrial average .DJI dropped 38.07 points, or 0.31 percent, to 12,080.50. The Standard & Poor’s 500 Index .SPX dropped 6.24 points, or 0.49 percent, to 1,271.80. The Nasdaq Composite Index .IXIC dropped 11.07 points, or 0.40 percent, to 2,736.41.
In a potential boost for markets looking for measures to end the debt crisis which has been at the root of investor angst, German Chancellor Angela Merkel is pressing for much more ambitious measures, including a central authority to manage euro-area finances and major new powers for the European Commission, European Parliament and European Court of Justice.
Economic data showed orders for manufactured goods dropped 0.6 percent in April, its third decline in four months and below expectations calling for a 0.2 percent rise.
An experimental Bristol-Myers Squibb (BMY.N) drug helped shrink tumors in patients with advanced melanoma, kidney and lung cancers in a preliminary trial, raising hopes for yet another drug that can wake up the immune system and train it to attack cancer cells. The stock rose 0.7 percent to $33.56.
Medtox Scientific IncO> surged 35.5 percent to $26.70 after Laboratory Corp of America Holdings (LH.N) said it will acquire its smaller rival for $27 per share in cash.
