Stocks Fell on European Sovereign Debt Jitters. Dow Laggards: AXP, DIS, JPM, CSCO, and BAC

Published on Tuesday, 07 September 2010 18:00 Written by Christopher Lynn

New York, September 7^th (TradersHuddle.com) – Stocks fell, snapping a four-day winning streak, as a report on European Bank Stress Tests raised concerns that the European debt crisis may worsen hampering the global economic recovery. The European jitters pushed the Dollar and Treasuries higher on safe haven demand.

The Dow Jones Industrial Average lost 107.24 points, or 1.03%. The S&P 500 index fell 12.67 points, or 1.15%, while the NASDAQ dropped 24.86 points, or 1.11%. Market breadth was negative. On the NYSE decliners outpaced winners by a rate of 17 to 6, while on the NASDAQ losers topped advancers by a rate of 17 to 5.

The market started under pressure, as Wall Street joined European markets lower after a report on the Wall Street Journal raised concerns that the European Bank Stress Tests understated the financial institutions sovereign debt holdings.

The report pushed financial shares lower, which also suffered after the Basel Committee said that Germany’s 10 biggest banks may need $141bn of additional capital under its new banking rules, prompting US-listed shares of Deutsche Bank (NYSE:DB) to fall more than 3%.

Financials, energy, and consumer discretionary were the worst performing sectors. Financial shares lost 2.4%, with American Express (NYSE:AXP), the credit card issuer, leading the charge lower, posting the biggest percentage decline in the Dow Jones Industrial Average. Shares of American Express tumbled 4.09% to $40.09, as it broke through a level of support at $41.83, leaving the next level of support at $39.14 and calculated resistance at $41.83.

The big financial institutions dragged on the overall financial sector. JP Morgan (NYSE:JPM) and Bank of America (NYSE:BAC), the largest U.S. lenders, were among the worst Dow components as shares fell more than 2.15%, pushing the KBW Bank index to a loss of more than 3%.

The consumer discretionary sector lost 1.6%. Walt Disney (NYSE:DIS), the largest media company in the world, was the second worst Dow component as shares dropped 2.39% to $33.84 on reports that its veteran ABC News President, David Westin resigned as president of ABC News after 13 years, saying he will seek opportunities outside of the Walt Disney Co. network. Mr. Westin will stay on through year-end while a replacement is sought, as a decline in viewership has put pressure on network news operations to curtail spending and find other ways to maintain profit

Cisco (NASDAQ:CSCO), the world’s largest networking equipment maker, fell 2.19% to $20.58, posting the fourth biggest percentage decline in the blue chip index. Cisco was among the stocks with the largest inflow of money, indicating market participants were buying the tech giant stock on weakness.

And energy stocks fell 1.6%, as crude oil pared earlier losses but still finished lower by 0.7% to $74.09 per barrel and natural gas futures fell 1.6%. Commodity prices were pressured by a stronger Dollar, which gained as European jitters increased investor demand for safe haven assets.

Treasuries also jumped on the increased safe haven demand. The government’s $33 billion three-year note auction drew a record low yield as investors renewed concern that Europe’s sovereign- debt crisis will undermine the global economic recovery. The yield on the 10-year note fell to 2.60% from the highest level in almost a month as equities dropped.