NEW YORK — Investors turned away from stocks ahead of the latest government report card on banks.
Stocks fell Monday, sending the Dow Jones industrial average down by about 100 points. Overseas markets also pulled back.
The government is expected to announce as early as Monday which banks will be allowed to return bailout funds. JPMorgan Chase & Co., Goldman Sachs Group Inc. and American Express Co. are expected to get approval to repay their loans, according to The Washington Post.
Other banks that were told by the government last month to raise funds to help protect against a potential worsening in the economy must submit plans Monday about how they are raising that capital.
Investors are also booking some gains from the market's three-month rally as concerns linger about the economy. The Standard & Poor's 500 index has surged 39 per cent from a 12-year low on March 9. Interest rates on government bonds are higher and oil prices are near six-month highs.
In midmorning trading, the Dow fell 93.48, or 1.1 per cent, to 8,669.65. The broader Standard & Poor's 500 index fell 8.87, or 0.9 per cent, to 931.22, and the Nasdaq composite index fell 23.95, or 1.3 per cent, to 1,825.47.
Major European markets fell. In afternoon trading, Britain's FTSE 100 fell 1.1 per cent, Germany's DAX index slid 1.4 per cent, and France's CAC-40 dropped 1.6 per cent. In Asia, Japan's Nikkei stock average finished with a gain of 1 per cent.
Investors are also concerned that the Federal Reserve might need to raise short-term interest rates earlier than expected, said Peter Jankovskis, co-chief investment officer at OakBrook Investments.
Mr. Jankovskis said the Fed's cutting of short-term rates to almost zero has helped support the banking system and consumers, but the central bank might have to reverse that position now to keep the dollar strong and ensure that foreign governments will remain big investors in Treasury bonds.
“There is genuine concern that maybe the Fed's hand has been forced,” Mr. Jankovskis said.
David Lutz, a managing director at Stifel Nicolaus said investors could begin pricing in a small interest rate hike, but that rate change eventually could be viewed as a positive sign because it would demonstrate the economy is improving.
Investors will be monitoring Treasury auctions throughout the week as well to determine how much demand there is for low-risk government debt, Mr. Lutz said.
In other trading, the Russell 2000 index of smaller companies fell 7.86, or 1.5 per cent, to 522.50.
Four stocks fell for every one that rose on the New York Stock Exchange, where volume came to 165.2 million shares.
Bond prices were mixed. The 10-year note fell to 3.81 per cent from 3.84 per cent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.18 per cent from 0.17 per cent Friday.
The U.S. dollar rose against other major currencies, while gold prices fell.
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