Investors fixated on the faltering economy brushed off the type of merger news that normally starts rallies.
Wall Street closed down more than 1 percent Monday as uneasiness about the economy eclipsed a bounce in troubled financial stocks and news of a big drug company merger. Stocks rose in the early going but eventually turned lower in a now familiar pattern where short-lived bursts of optimism give way to concerns about the country’s economic woes.
Financial stocks rose on a news report that Bank of America Corp. could raise capital in the private sector. Shares of major banks have been pummeled to multiyear lows amid growing concern that they don’t have enough cash to cover future losses despite multiple government rescues.
“Any bank right now that can raise money in the private sector, that is a major positive for the market,” said Quincy Krosby, chief investment strategist at The Hartford. “It’s another way to raise capital rather than the government infusing capital into the banks.”
But remarks from billionaire investor Warren Buffett added to an overall downbeat mood. He said during an appearance on CNBC that the economy has “fallen off a cliff” over the past six months. He noted that consumers have changed their habits in remarkable ways.
Investors even wrote off rare dealmaking as moves borne more of necessity than opportunity as drugmakers Merck and Schering-Plough announced plans to combine in a $41 billion deal.
“Any type of news we get, the market is just skeptical,” said Jon Biele, head of capital markets at Cowen & Co.
According to preliminary calculations, the Dow Jones industrial average fell 79.89, or 1.2 percent, to 6,547.05.
The Standard & Poor’s 500 index fell 6.85, or 1 percent, to 676.53, while the Nasdaq composite index fell 25.21, or 2 percent, to 1,268.64.
The Russell 2000 index of smaller companies fell 7.79, or 2.2 percent, to 343.26.
About five stocks rose for every two that fell on the New York Stock Exchange, where volume came to 1.56 billion shares.