The S&P 500 lost 0.8 percent to 1,095.55 at 1:41 p.m. in New York, halting a four-day rally. The Dow Jones Industrial Average retreated 75.91 points, or 0.7 percent, to 10,372.02. The gaps between 10-year German bond yields and those of Irish and Portuguese debt climbed to all-time highs, while the German- Greek yield spread increased to the widest since May.

U.S. stocks last week snapped three weeks of declines as better-than-estimated growth in private employment and manufacturing increased optimism that the world’s largest economy will avoid slipping back into recession. The S&P 500 remains 10 percent below this year’s peak in April.

A gauge of S&P 500 banks had the biggest decline among 24 groups, dropping 2.6 percent. The KBW Bank Index of 24 stocks slumped 2.6 percent. Bank of America lost 1.8 percent to $13.26, while Citigroup fell 1.9 percent to $3.84.

Global stocks also fell after a German government report showed factory orders unexpectedly fell in July as demand in the euro region weakened, indicating the recovery in Europe’s largest economy is losing momentum. Policy makers in Japan and Australia left interest rates steady today, citing concerns that the outlook for U.S. growth is deteriorating.

The benchmark index for U.S. stock options had the biggest increase in almost one month. The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose as much as 12 percent to 23.92, the biggest gain since Aug 11. The index, which measures the cost of using options as insurance against declines in the S&P 500, last week slid to the lowest level in four months. The gauge is down from this year’s peak close of 45.79 on May 20.

Shares of metal and energy producers slumped as concern about the global recovery sent the U.S. dollar higher, reducing the appeal of commodities as an alternative investment.

The S&P 500 has fallen for three of the last four months as Europe’s debt crisis and disappointing U.S. economic reports ranging from home sales to employment raised concern the economy may slip back into a recession. Oppenheimer predicts the index may rally through the rest of 2010 as rising corporate profits lead investors back to stocks.

Posted by Shayne Heffernan on Sep 7th, 2010and filed underLatest News, Markets, News & Events, USA.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site