S&P falls to bear market over Greek fears

 
City A.M. Reporter
US stocks have fallen steeply, sending the benchmark Standard & Poor's 500 index sliding into bear market territory, as investors digested the eurozone decision to delay Greece's the next tranche of aid.

Fears over deepening problems in Europe's financial system have contributed to equity losses and increased volatility in the past several months, leaving the index more than 20 per cent down from an intraday high in early May.

Analysts fear stocks are headed for an extended period of poor performance. Volume has generally been stronger on days when stocks decline, a sign that buyers were hesitant to invest.

"There's indiscriminate selling at this point, without any real justification. No one really understands what's going on in Europe, and until we get more clarity I doubt if we'll see much interest in buying," said Eric Green, senior portfolio manager at Philadelphia-based Penn Capital Management, which oversees $6.5bn.

The Dow Jones industrial average is down by more than 150 points or 1.4 per cent, while the S&P 500 is off by 9.05 points, or 0.82 per cent.

The Nasdaq Composite Index was up 4.1 points, or 0.18 per cent, helped by Federal Reserve Chairman Ben Bernanke, who told Congress the Fed was prepared to take more steps to help a fragile recovery.

US banks continued to be pressured by Europe's problems. Morgan Stanley was down nearly four per cent in early trading, and is off about 56 per cent this year.

The financial sector has been among the hardest hit in recent months, with the KBW Bank Index falling 36 per cent since April 29 due to fears of exposure to European debt.

Officials have postponed an aid payment to Greece and considered making banks take bigger losses on Greek debt.

Wall Street's losses extended the previous day's decline to 13-month lows as investors feared the crisis in Europe could throw the US into a new recession.

"The main driver of our shift in views has been the escalation of bank funding stress in the Euro area, alongside deeper public budget cuts in a number of European countries," Goldman said in a note.

Nine of ten S&P sectors were down, but gains in some large-cap technology stocks limited sector declines and capped Nasdaq losses. F5 Networks Inc rose 7.2 per cent to $75.58 while Yahoo Inc was up 4.7 per cent on $14.16.