Greek debt fears shake US stocks
Fear that Greece could default on its debt and abandon the euro rattled global financial markets.
News that negotiations between Greece and its international lenders are making little progress sent European stock markets down sharply, and the selling spread across the Atlantic.
By the close of US trading, stocks across industries were lower, with four of five stocks down. Investors shifted money into German government bonds, a perceived haven in troubled times.
In the US, disappointing first-quarter financial results from several big companies fed the selling. After American Express reported revenue that fell short of expectations, investors drove down its stock more than 4%.
"The day of reckoning" for Greece is fast approaching, said Uri Landesman, president of investment fund Platinum Partners.
"People thought everyone would work it out, but if no one caves, there won't be a deal."
For all the turmoil in the markets, major US stock indexes closed the day with relatively modest losses. At one point, the Dow Jones industrial average was down 357, heading for its worst day in six months.
The Dow regained some of those losses toward the close of trading, ending down 279.47 to 17,826.30, a drop of 1.5%.
That was only the worst drop since March 25. The Dow has struggled since reaching a record high on March 2 and is now back where it started the year.
The Standard & Poor's 500 index lost 23.81 points, or 1.1%, to 2,081.18. The Nasdaq composite fell 75.98 points, or 1.5%, to 4,931.81.
Greece and its creditors are still struggling to find a deal that can keep the country from defaulting on its debt. The argument is over what reforms Greece should make in return for loans.
Many think Greece will struggle to make payments to the International Monetary Fund due next month if it fails to reach a deal.
The concerns have caused investors to demand higher rates for loaning money to Greece's government. The yield on the country's benchmark 10-year bond jumped to 12.72% yesterday. That rate has more than doubled from 5.51% in September.
In corporate news, Honeywell International fell 2.22, dollars, or 2%, to 101.70 dollars after reporting disappointing first-quarter results. The industrial conglomerate posted earnings per share that beat estimates, but its revenue fell short.
Advanced Micro Devices plunged 10% after reporting a larger loss than investors had expected after the market closed on Thursday. The chipmaker's stock fell 29 cents to 2.58 dollars.
Investors have been bracing themselves for a disappointing earnings season. Companies in the S&P 500 are expected to report earnings per share fell 2.6% from a year earlier, according to S&P Capital IQ, a research firm. That would be the first drop since 2009.
Jim Paulsen, chief investment strategist at Wells Capital Management, said stocks are now somewhat expensive compared with earnings and, along with a list of other worries, the news from Greece yesterday proved just too much to bear.
"When you have more nervous investors, news becomes magnified," he said.
Worrying news out of China also weighed on investors. After markets closed in Asia, Chinese financial regulators issued warnings about the country's soaring stock market.
Regulators said they will tighten rules on borrowing to buy stocks. They also plan to make it easier for investors to bet against the market there, The Wall Street Journal reported. Shanghai's stock market has more than doubled in the last year.
"People are thinking maybe the party is over in China," said Doug Cote, chief market strategist for Voya Investment Management.
"China recognises that it could be creating a bubble, and now it wants to slow down. It's trying to rein back risk."
Germany's DAX index dropped 2.6%. France's CAC 40 shed 1.6% and Britain's FTSE 100 fell 0.9%.
Investors piled into German government debt, which is perceived as being among the safest investments denominated in euros. Yields on Germany's 10-year government note, which moves opposite to its price, fell to 0.07%, a record low, according to Tradeweb.
The price of oil fell nearly 3% on a slowdown in the reduction of working drilling rigs, but finished the week sharply higher. A closely watched industry count of drilling rigs showed a decline of 26 US rigs for the week, compared with a decline of 42 last week.
Benchmark US crude fell 97 cents to close at 55.74 dollars a barrel in New York. US crude finished up 8% for the week, however. Brent crude fell 53 cents to close at 63.45 dollars a barrel in London.