Asian indexes were lower after the news of the death of the North Korean leader, Kim Jong-il, raised concerns about regional stability.
Trading on Wall Street had opened higher but then turned negative in late morning. Analysts said that market moves were expected to be exaggerated, with lighter volumes in a holiday week.
During the day, some focus shifted to European sovereign debt troubles as the president of the E.C.B., Mario Draghi, forecast a difficult year for banks. Comments by Mr. Draghi in The Financial Times that dimmed the prospect of large-scale government bond purchases by the central bank — as well as a report in The Wall Street Journal that the Federal Reserve would rebuff pressure from American banks and go along with international recommendations on capital levels for banks — also affected the markets, analysts said.
“That kind of set a little bit of a negative tone,” said Brad Sorensen, an analyst for the Schwab Center for Financial Research. “For financials, the higher capital requirements mean they have less money to make money with. In an already tough environment, it gets a little bit more difficult.”
He added, “Any time there is some uncertainty there, that kind of frightens the market a little bit.”
The Dow Jones industrial average closed off 100.13 points, or 0.8 percent, at 11,766.26. The Standard Poor’s 500-stock index was down 1.2 percent, and the Nasdaq composite index fell 1.3 percent.
Bank of America dropped to $4.99, a decline of more than 4 percent. Morgan Stanley was down 5.5 percent, to $14.16.
While Mr. Draghi warned of a difficult year for banks, credit crunches are already visible in some countries like Ireland, Vitor Constâncio, the vice president of the E.C.B., told reporters in Europe on Monday. Meanwhile, slower economic growth is likely to lead to an increase in bad loans, which will further weaken lenders.
Keith B. Hembre, the chief economist and chief investment strategist at Nuveen Asset Management, said it was difficult to tie the day’s market movements to what was going on in Europe but said there was “overarching concern in my view” considering that there had been strong demand for the E.C.B. funding program, suggesting that banks margins could be pinched.
“Just in terms of the market performance today it is a little similar to Friday, when you have a pop at the open and then lost ground,” Mr. Hembre said. “There is somewhat of a European influence in that. It is not like there is any real dominant news story.”
Stocks had a choppy day on most major European exchanges, falling early, then rebounding in midsession before ending mixed. The Euro Stoxx 50 closed slightly higher, or about a quarter of a point. The index in Paris, the CAC 40, was up less than 0.1 percent, while the German DAX was down 0.5 percent. The FTSE 100 index in London was down 0.4 percent.
United States bonds were down 4 basis points to 1.81 percent in yield. German government bonds, which along with the United States Treasuries are considered to be among the most secure investments in the world, were little changed, suggesting investors were calm after the shock of the Korean news wore off. They closed up 3 basis points to 1.875.
The dollar gained against other major currencies. The euro fell to $1.3017 from $1.3046 late Friday in New York.
In Asia, the Tokyo benchmark Nikkei 225 stock average fell 1.3 percent. The Sydney market index S.P./ASX 200 fell 2.4 percent. In Hong Kong, the Hang Seng index fell 1.2 percent and in Shanghai the composite index fell 0.3 percent.
David Jolly and Jack Ewing contributed reporting.
Article source: http://feeds.nytimes.com/click.phdo?i=ec64c155f1389d0b1c3e97af419272ae
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