Stocks decline over Europe's bank worries

Stocks closed lower yesterday following new worries about Europe's debt problems. Treasury prices rose, and gold settled at a new high as investors sought out safe assets.

U.S. stocks followed European markets lower after news reports said banks in Europe may have more risky government debt on their books than was disclosed during "stress tests" earlier this year.

That could mean fees from regulators and more capital-raising by the banks to bolster their balance sheets.

The dollar rose against the euro, and shares of major European banks, including UBS, fell.

The Dow Jones industrial average fell 107.24 points, or 1.03 percent, to close at 10,340.69. Broader indexes also fell, making for a weak start to a week shortened by the Labor Day holiday on Monday. The Standard & Poor's 500 index lost 12.67, or 1.1 percent, to 1,091.84, while the Nasdaq composite index fell 24.86, or 1.1 percent, to 2,208.89.

"The soundness of stress tests are, and continue to be, in question," said Brian O'Reilly, president of the Collingwood Group. Uncertainty about the tests could be a drag on the market until European regulators provide some more transparency about exactly what figures were included in the test, O'Reilly said.

The reports renewed worries about European government debt, which had flared up earlier this year following a fiscal crisis in Greece that spread to other weak European economies and helped bring stocks down worldwide.

Stocks had been doing well last week, rallying on improved news about job growth and gains in manufacturing in the United States and China.

The better economic news helped the market end higher for the week, breaking three straight weeks of losses.

Many investors still have faith the economy is growing, but the pace of that growth is in question.

"It's very tough for the public to decipher what's happening," said Brian Peardon, a wealth adviser at Harrison Financial Group.