Stocks and Bonds: U.S. Stocks Tumble as Concern Over Europe’s Debt Crisis Heightens

Treasury prices and the dollar rose. Asian and European shares were lower after developments in Greece, Spain and Italy refocused attention on the euro zone’s fiscal uncertainty. Manufacturing statistics released by Germany and China were softer than forecast, raising the prospect of slower growth in Europe and in China, which has the world’s second-largest economy, and unsettling investors.

“It is a bit of a risk-off environment right now,” said Eric Viloria, senior technical strategist for Forex.com. “Markets are risk-averse, and the U.S. dollar is benefiting.”

The Dow Jones industrial average fell 130.78 points, or 1.05 percent, to 12,381.26, its lowest close since April 19. The Standard Poor’s 500-stock index was down 15.90 points, or 1.19 percent, at 1,317.37. The Nasdaq was down 44.42 points, or 1.58 percent, at 2,758.90

Materials, energy, industrials, utilities, financials and information technology tumbled by about 1 percent.

Caterpillar fell about 2.34 percent, to $101.89, and General Electric was 1.17 percent lower at $19.39. Energy stocks tumbled, with Halliburton falling 2.16 percent, to $46.16, Exxon Mobil down 1.1 percent at $80.67, and Schlumberger down 1.7 percent at $82.08.

Citigroup was more than 2 percent lower at $40.16, while Bank of America was lower by 1.38 percent at $11.42. JPMorgan Chase fell more than 1.3 percent to $42.55.

In Asia, the Nikkei index fell by more than 1.5 percent and the Hang Seng was down by just over 2 percent. The Shanghai index was lower by 2.9 percent.

In Europe, the CAC 40 closed down by 2.1 percent, the DAX in Germany was 2 percent lower, and the FTSE ended the day down by 1.9 percent.

Analysts said recent news from Europe had not instilled confidence in the Continent’s ability to handle its fiscal challenges. Last week, Fitch Ratings downgraded Greece’s credit ratings by three levels to B+, a rating that is below investment grade. Standard Poor’s lowered its outlook on Italy’s debt to negative from stable over the weekend, citing a weaker outlook for growth and lower prospects for the country’s ability to trim its debt.

And Spain made headlines after its Socialist Party lost on Sunday in regional and municipal elections as tens of thousands of Spanish protesters, their anger partly fueled by the debt crisis and joblessness, are trying to force an overhaul of the political system.

Declines in Asia’s markets followed the HSBC preliminary purchasing managers’ index reading, a gauge of the manufacturing sector activity, for China, which fell to a 10-month low of 51.1 in May, according to news agencies, signaling a slowdown in expansion. Still, the Chinese government is poised to continue fiscal tightening. A similar gauge for Germany dropped to 54.9 in May, below forecasts.

The financial services and valuations company, Markit, said on Monday that its manufacturing P.M.I. for the euro zone was at a seven-month low at 54.8 in May, the sharpest slowdown since just after the collapse of Lehman Brothers in 2008, according to Chris Williamson, the chief economist.

While the numbers could have been affected by seasonal factors like the timing of Easter this year or by supply chain disruptions from the disasters in Japan, they show a “more fundamental slowing in the pace of economic growth,” he said in a statement.

Bruce McCain, the chief investment strategist of Key Private Bank, said the signs of weaker economic activity in China were counterbalanced by high inflation, with the possibility that they would have to continue to raise rates.

In Europe, he added, “not only are they again grappling with the sovereign debt issue, but inflation remains uncomfortably high and they seem determined to raise rates again.”

Treasury prices rose on Monday. The Treasury’s benchmark 10-year note rose 5/32, to 99 31/32 , and the yield fell to 3.13 percent from 3.15 percent late Friday. The yield has fallen by more than 40 basis points in a little more than a month.

Concerns over Europe reawakened the potential for oil demand to decline, causing crude prices on Monday to slip.

The dollar was higher against a range of currencies, with the euro falling below $1.40.

“Certainly while there is concern about the dollar’s secular decline we have to be encouraged that it is still seen as a strong currency,” said Colleen Supran, a portfolio manager with Bingham, Osborn Scarborough, which is based in San Francisco.

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