Stocks & Bonds: Wall Street Recovers After Fresh Worries Shake European Markets

Markets have been subject to sharp swings in recent weeks, particularly as concerns over the sovereign debt crisis have grown. The latest slide in the currency and stock markets occurred Monday, set off by the resignation on Friday of Jürgen Stark, a top German official at the European Central Bank. His move highlighted policy discord in the bank.

It also aggravated concerns in the currency markets that Germany was preparing contingency plans for its banks in the event of a Greek default, Eric Viloria, senior market strategist for Forex.com, said.

Greek bonds showed record high yield spreads on Monday, while German bonds were at lows, Mr. Viloria noted.

“There are actually quite a bit of factors that are weighing on the euro today,” he said, adding that investors were avoiding assets they viewed as risky. “You are seeing some dollar strength, and that is highlighted by the yields.”

Analysts attributed the market movements on Monday to concerns from last week over Greece and fresh worries about the possibility of sovereign downgrades.

“This is not a problem resolved in an afternoon,” Peter Tuz, the president and portfolio manager at Chase Investment Counsel, said. “And it looks like things are going to get worse before they get better.”

Stocks on Wall Street veered from mixed to more than 1 percent lower, then made a late push to close higher.

The Standard Poor’s 500-stock index gained 8.04 points, or 0.70 percent, to close at 1,162.27. The Dow Jones industrial average added 68.99 points, or 0.63 percent, to close at 11,061.12, and the Nasdaq composite index rose 27.10 points, or 1.10 percent, to close at 2,495.09.

In Europe, the FTSE 100 in Britain dropped 1.6 percent and the Euro Stoxx 50 index of euro zone blue chips was off 3.8 percent. The DAX in Germany lost 2.3 percent, and the CAC 40 in France tumbled 4 percent despite fresh efforts by the French government and one of the hardest-hit banks, Société Générale, to calm nerves.

Asian markets slumped. The Nikkei 225 index closed down 2.3 percent, and the Hang Seng in Hong Kong fell 4.2 percent.

The euro finished at $1.36, after declining rapidly to $1.35 against the dollar, from $1.41 just over a week ago.

Interest rates rose slightly. The Treasury’s benchmark 10-year note fell 10/32, to 101 19/32, and the yield rose to 1.95 percent from 1.92 percent late Friday. Gold fell $46.50 to $1,809.90 an ounce.

In equity markets, the technology, financial and consumer discretionary sectors were all up more than 1 percent.

Bank of America and JPMorgan Chase were each up more than 1 percent, at $7.05 and $32.42, respectively. Wells Fargo rose more than 2 percent to $24.10.

But European financial institutions felt the brunt of the uncertainty on Monday. Moody’s Investors Services warned recently about the exposure of those banks to Greek sovereign debt, and the stock price of Société Générale and BNP Paribas fell as much as 12 percent as investors braced for a possible downgrade to their credit ratings.

While any downgrade was expected to be small, it would probably increase turmoil in financial markets.

Liz Alderman and Bettina Wassener contributed reporting.

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