Stocks fall on worries about US broker, Europe

Banks are dragging the stock market lower as worries resurface about the European debt crisis and the broker MF Global.

The Dow Jones industrial average is down 135 points, or 1.1 percent, to 12,095 at 9:52 a.m. Monday.
The decline comes after the Dow closed out its fifth straight week of gains, its best winning streak since January.

Bank stocks dropped sharply in early trading after the New York Federal Reserve suspended MF Global Holdings from conducting new business as a Treasury bond dealer.

Trading in MF Global stock was halted. In early trading, Citigroup Inc. dropped 4 percent. Bank of America Corp and JPMorgan Chase & Co. dropped more than 2 percent.

The Wall Street Journal reported Monday that MF Global would seek Chapter 11 bankruptcy protection after large investments in government bonds from European countries have backfired. Moody’s Investors Service and Fitch Ratings have slashed the firm’s credit rating to junk grade.

The Standard & Poor’s 500 index is down 17, or 1.3 percent, to 1,268. The Nasdaq is down 38, or 1.4 percent, to 2,700.

Major stock indexes dropped in Europe. Germany’s DAX fell 2 percent. France’s CAC-40 dropped 1.7 percent.

The Organization for Economic Cooperation and Development warned Monday that European economies will see a “marked slowdown” next year.

The organization called on the European Union to provide more information on how it plans to stem the debt crisis.

European leaders unveiled a plan last Thursday to expand a regional bailout fund and detailed other steps to contain the debt crisis in Greece. The news propelled U.S. stock indexes up more than 3 percent.

The European debt crisis is still far from fixed. One troubling sign is that borrowing costs for Italy and Spain have increased, a signal that traders remain worried about their ability to pay their debts.