US stocks fall as European gloom returns

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By DANIEL WAGNER, Associated Press

A reminder of Europe's crippled economy tugged U.S. stocks broadly lower Monday.

An index of business confidence in Germany, the biggest economy in Europe, fell for a fifth straight month. Many economists had expected it to at least remain flat. Some think Germany is headed for a recession.

The Dow Jones industrial average fell 26 points to 13,553 as of 11:30 a.m. EDT.

The Standard & Poor's 500 index declined four to 1,456. Its two strongest groups were utilities and telecommunications, safer stocks that tend to do well in a weaker economy.

The Nasdaq composite index dropped 19 points to 3,160. Technology shares were dragged lower by Apple.

The threat of the years-old European debt crisis has seemed less immediate in recent weeks. Traders have been cheered central banks' new measures aimed at boosting the global economy.

As in the U.S., the concern in Germany is that an economy on the rebound will be weighed down by the rest of the European countries, half of which are already in recession.

Germany's economy grew 0.3 percent in the second quarter from the previous quarter, but a number of economists now believe the country will fall into a recession in the second half of the year.

In the U.S., stocks have gone from underpriced to fairly priced, said Doug Cote, chief market strategist at ING Investment Management. Recent weakness in U.S. manufacturing bodes poorly as companies start reporting quarterly earnings next month.

"It will be a sea change — the first time in three years that we've had negative earnings growth," Cote said. He said China's abrupt economic slowdown is adding to corporate America's woes.

In the U.S., traders are looking for more good news from the housing market, which appears to be bouncing back after being a stuck in a rut for years. The latest data on new and pending home sales is released later in the week.

Lennar on Monday became the latest builder to post surprisingly strong earnings. A rise in orders and the number of homes delivered, adding to a big tax benefit, had the Miami homebuilder quadrupling profits. KB Home on Friday did almost as well, and housing shares jumped on optimistic comments from its CEO, Stuart Miller.

Lennar fell 66 cents to $36.85. KB Home fell 44 cents to $14.82.

Apple fell after sales of the new iPhone 5 missed analysts' targets. The company sold 5 million units in three days. Its stock fell $9.43, or 1.4 percent, to $690.67.

UnitedHealth Group was flat on its first day in the Dow, which shuffled its lineup of stocks to reflect health care's growing importance in the economy. UnitedHealth, the nation's largest health insurer, replaces Kraft Foods in the Dow.

Peregrine Pharmaceuticals Inc. stock collapsed after the cancer drug developer told analysts they should not rely on recently disclosed data about its lead product, a proposed lung cancer treatment. The stock fell $5.16, or 77 percent, to $1.24.

The price of oil fell below $92 a barrel, dragged down by concerns about weakening global growth and demand for crude. Benchmark crude was down $1.58 at $91.31 per barrel in electronic trading on the New York Mercantile Exchange.

Stronger demand for safe investments pushed the yield on the 10-year Treasury note down to 1.72 percent from 1.75 percent late Friday.

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Daniel Wagner can be reached at www.twitter.com/wagnerreports.

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