U.S. stocks fell Monday, after a two-week rally in the Standard & Poor’s 500 index, as Moody’s Investors Service said it will review the ratings of all European Union countries.
The S&P 500 slid 2.13% to 1,228.40 at 11:58 a.m. EST. The benchmark gauge for U.S. equities rose 8.3% over the previous two weeks. The Dow Jones industrial average fell 216.23 points, or 1.77%, to 11,968.03.
“This is not heaven,” Stanley Nabi, vice chairman of Silvercrest Asset Management Group, which oversees $10.5 billion, said in a telephone interview. “The European stopgap may not be successfully implemented. In order for this program to be successful, there’s going to have to be a lot of belt tightening. That means that the European economy is not going to do well at all. That would have negative impact on other countries around the globe.”
Stocks rose last week as European leaders agreed to boost a rescue fund and reports spurred optimism about the U.S. economy. A gauge of financial shares in the S&P 500 had the biggest gain among 10 groups this month through Dec. 9, adding 2.1%. The industry led the losses in the index this year.
American stocks joined a global slump Monday as Moody’s said last week’s EU summit failed to produce “decisive policy measures” to end the region’s crisis. Bundesbank President Jens Weidmann told the Frankfurter Allgemeine Sonntagszeitung that while the new fiscal accord represents “progress,” the onus is on governments rather than the European Central Bank to resolve the crisis with financial backing.
“The big issue is: Did the European summit do enough to stave off these downgrades or not?” Nick Sargen, chief investment officer at Fort Washington Investment Advisors, which oversees more than $39 billion, said in a telephone interview. “Most people come to the conclusion that downgrades on the region’s sovereigns are easily justifiable. If the rest of the world is slowing down, we too would feel some of that impact.”