Stocks fall on higher European borrowing costs

[April 14, 2012]  WASHINGTON (AP) -- It was another losing week on Wall Street after worries about Europe returned.

Stocks closed lower on Friday and closed out their worst week of the year so far. The Dow Jones industrial average lost 1.6 percent for the week, the Standard & Poor's 500 index fell 2 percent.

The Dow is still ahead 5 percent for the year after a gangbusters first quarter. After the kind of returns investors have enjoyed so far this year, some "it's not surprising that we sort of slosh around here for a bit," said Jim Dunigan, managing executive of investments for PNC Wealth Management.

On Friday the Dow lost 136.99 points to close at 12,849.59, a loss of 1.1 percent. It was down all day but the losses got worse in the last half-hour. The decline wiped out much of the Dow's 181-point gain the day before.

The Standard & Poor's 500 index fell 17.31 points, or 1.3 percent, to 1,370.26. The Nasdaq composite fell 44.22 points, 1.5 percent, to 3,011.33.

Investors had several reasons to wonder about the prospects for global economic growth. Higher borrowing costs in Europe reminded investors that the continent's debt problems aren't over. Growth slowed in China. And a closely watched gauge of consumer confidence came in weaker than analysts were expecting.

Peter Cardillo, chief market economist at Rockwell Global Capital, said investors are worried that Europe's economic problems will be bigger than previously expected. Europe needs to growth to fix its debt problems, but higher borrowing costs could force more cuts in government spending.

"You can't have growth if you have too much austerity," Cardillo said. "I think that's what the fear is."

European markets fell broadly. Indexes in France and Germany fell more than 2.4 percent. The FTSE 100 index in Britain fell 1 percent.

The worries are concentrated in Spain and Italy, and it showed up in their financial markets Friday. Spain's main stock index fell 3.6 percent and is now down 15 percent for the year. The yield on its 10-year government bond rose to 5.93 percent, and Italy's rose to 5.52 percent. That's a sign that investors' confidence in those countries' finances slipped. It also means those countries will have to pay more to borrow money.

New data showed the Chinese economy grew at an 8.1 percent pace in the January-March period, the slowest in almost three years. In the U.S., a closely-watched gauge of consumer confidence came in weaker than analysts had been expecting.

The stock declines were broad. All 10 market sectors tracked by the S&P 500 index fell, led by a 2.3 percent drop in financial stocks.

Bank of America Corp. fell 5.3 percent. Wells Fargo & Co. and JPMorgan Chase & Co. both reported better-than-expected profits, but each fell more than 3.5 percent as investors focused on comments that said the overhang from bad loans would continue.

Among stocks making big moves:

• Apple Inc. fell 2.8 percent after reports that a German court ruled against it in a patent fight with Motorola over mobile e-mail technology.

• Google fell 4 percent after the company said it would issue new non-voting stock to shareholders.

• Coinstar, which runs the Redbox DVD rental kiosks, rose 7.3 percent after it raised its revenue forecast.

• Dow Chemical rose 1.6 percent after it raised its quarterly dividend 28 percent. The company said last week it would eliminate 900 jobs and close several plants.

The dollar and Treasury prices rose. Oil dropped 81 cents to $102.83 per barrel.

[Associated Press; By JOSHUA FREED]

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