Traders gave in to another case of last-hour anxiety Monday and drove stocks to their lowest level in seven months.
The Dow Jones industrial average, down just 42 points at 3:15 p.m., was down 115, or 1.2 percent, by the close 45 minutes later. That extended the Dow's sharp drop from Friday, when it lost 323 in response to a disappointing May jobs report. Broader indexes had steeper percentage drops than the Dow on Monday. The technology-focused Nasdaq composite index fell 2 percent. Treasury prices rose as investors again went in search of safe investments.
There was no obvious catalyst for Monday's late slide, although traders were again preoccupied with Europe's economic problems. Traders know that Europe's business day begins before trading opens in the U.S., and they'd rather sell then wake up to an unpleasant surprise. The last-hour selling, which followed a similar move Friday, also recalled the 2008 financial crisis, when traders decided the best strategy was to dump stocks just before the close.
Monday's trading also showed how the market's own dynamics can trigger late selling. Shortly after 3 p.m., the Standard & Poor's 500 index fell below 1,056.74, what had been its low close for the year that it reached Feb. 8. That psychological blow encouraged many traders to sell, and as prices came down, computer "sell" programs kicked in, leading to more selling.
Tech stocks, seen as some of the most vulnerable when the economy and the market are troubled, suffered some of the biggest losses. That explains the drop in the Nasdaq index.
But some stocks fell on their own bad news. Google Inc. was one of the big tech losers, falling 2.7 percent after Connecticut Attorney General Richard Blumenthal called on the company to "come clean" on its collection of personal and business data in the state for its mapping service.
Financial stocks fell after a commission examining the financial crisis issued a subpoena to Goldman Sachs Group Inc. Goldman fell 2.5 percent. And Bank of America Corp. lost 3.4 percent after news came out that the bank would pay $108 million to settle federal charges that its Countrywide Financial Corp. division had collected onerous fees from homeowners nearing foreclosure.
Utility and gold stocks were among the few gainers, a sign that traders want investments considered safe in weak economies. Utility company FirstEnergy Corp. rose 2.7 percent, while Barrick Gold Corp. climbed 4.1 percent.
"The market is playing defense and waiting for some resolution," said Mike Shea, managing partner at Direct Access Partners LLC in New York, pointing to the rise in gold stocks.
Some traders say the market isn't likely to stabilize until there is a better sense about how European countries will hold up under heavy cost-cutting that could hamper their economic growth. Traders again looked to the euro for guidance. The 16-nation currency hit another four-year low. It fell as low as $1.1878 before rising to $1.1926. A drop in the currency is seen as a sign of flagging confidence in Europe's ability to contain its debt without falling back into recession.
The Dow fell 115.48, or 1.2 percent, to 9,816.49. The Dow has fallen 4.3 percent in the past two days, its worst back-to-back slide since early May.
The S&P 500 index fell 14.41, or 1.4 percent, to 1,050.47.
It was the lowest close for the Dow and the S&P 500 index since Nov. 4.
The Nasdaq composite index fell 45.27, or 2 percent, to 2,173.90. The Nasdaq stands at its lowest level since Feb. 10.
Traders' worries, mostly about Europe, have pounded stocks since major indexes hit 2010 highs in late April. The Dow is down 12.4 percent since reaching 11,205 on April 26. The drop of more than 10 percent from the peak indicates a "correction." It's the first major drop since indexes bounced off 12-year lows in March last year. The Dow is up 49.9 percent from its March low.
Treasury prices extended their gains after surging Friday on concern about the employment numbers. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.15 percent from 3.21 percent late Friday.
The dollar, which has a reputation for safety, rose against most other currencies. Gold rose $23.10 to $1,240.80 an ounce.
Crude oil fell 7 cents to $71.44 per barrel on the New York Mercantile Exchange. Traders see commodities, like stocks, as riskier investments. So many commodities have suffered as the stock market has fallen.
Jim Thorne, chief investment officer for equities at MTB Investment Advisers in Baltimore, said traders are afraid they're seeing a repeat of the financial crisis of 2008. But Thorne said that although the jobs report Friday was disappointing, most numbers have pointed to an economy that is rebounding. The government said Friday that private employers hired just 41,000 workers in May, down from 218,000 in April and the lowest number since January.
"Right now the market is getting to the point where it's uninvestable. Fundamentals don't matter," Thorne said. "This is a period that will be looked back upon six to eight months from now as a wonderful investing opportunity."
Among bank stocks, Goldman fell $3.57, or 2.5 percent, to $138.68, while Bank of America fell 52 cents, or 3.4 percent, to $14.83.
FirstEnergy rose 94 cents, or 2.7 percent, to $36.16, while Barrick Gold rose $1.70, or 4.1 percent, to $43.12.
Google fell $13.20, or 2.7 percent, to $485.52.
Apple Inc. fell $5.02, or 2 percent, to $250.94 after CEO Steve Jobs said that the company's next iPhone would be thinner and have sharper screen resolution and longer battery life.
Nearly three stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume fell to 5.6 billion shares from 6.3 billion Friday.
The Russell 2000 index of smaller companies fell 15.48, or 2.4 percent, to 618.49.
Britain's FTSE 100 dropped 1.1 percent, Germany's DAX index fell 0.6 percent, and France's CAC-40 fell 1.2 percent. Japan's Nikkei stock average fell 3.8 percent in its first day of trading after U.S. markets tumbled Friday.