Bank, Pfizer spur stocks to dive

Associated Press

NEW YORK

U.S. stocks slumped Monday, and banks took the biggest losses. Deutsche Bank plunged as investors worried about the financial health of Germany’s largest bank.

Pfizer pulled drug makers down after it announced it won’t break up into two companies.

Stocks fell for the second day in a row. Banks were hurt by a drop in bond yields, which means lower interest rates and smaller profits on loans. Consumer companies fell as home improvement retailers were affected by a slowdown in sales of new homes.

European banks tumbled after the German magazine Focus said Deutsche Bank won’t get a government bailout if it asks for one. Its report, published Friday, cited “government circles” as its source.

“There’s some stress in the banking industry there, and questions about whether governments have the will to step in,” said Steve Chiavarone, associated portfolio manager for Federated Investors.

The Dow Jones industrial average lost 166.62 points, or 0.9 percent, to 18,094.83. Stocks are coming off two weeks of solid gains, and the Nasdaq set all-time highs twice last week.

Focus’ article also said the German government won’t help the Deutsche Bank by intervening with U.S. officials who want it to pay $14 billion to end an investigation into its sale of mortgage-backed securities. The bank’s U.S.-listed shares tumbled 90 cents, or 7.1 percent, to $11.85. The stock is down 51 percent this year.

Other banks also tumbled. Goldman Sachs took the largest loss among Dow stocks and sank $3.65, or 2.2 percent, to $161.48. Citigroup shed $1.26, or 2.7 percent, to $45.89.

Bond prices rose. The yield on the 10-year U.S. Treasury note fell to 1.58 percent from 1.62 percent. That also affects banks, as lower bond yields mean lower interest rates and smaller profits on lending.

Stocks overseas also weakened. The DAX in Germany dropped 2.2 percent and France’s CAC 40 fell 1.8 percent. In Britain, the FTSE 100 was down 1.3 percent. Japan’s benchmark Nikkei 225 edged down 1.3 percent. South Korea’s Kospi slipped 0.3 percent and Hong Kong’s Hang Seng lost 1.7 percent.

Home Depot and Lowe’s sank after the government said sales of new homes fell almost 8 percent in August. That followed a big jump the month before.

Home Depot shed $2.34, or 1.8 percent, to $125.45 and Lowe’s fell $1.54, or 2.1 percent, to $70.81.

Pfizer, one of the largest drug companies in the world, traded lower after it said it will not split into two smaller companies. Some of its investors had supported that plan in the hope it would bolster the value of their stock and accelerate growth, but lately the Viagra maker has been signaling that it probably wouldn’t break up. Its stock fell 62 cents, or 1.8 percent, to $33.64.