By Donna Kardos Yesalavich
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--U.S. stocks fell Monday, sending the Dow Jones Industrial Average below the 11000 level, as investors worried that the $112.61 billion Irish bailout might not be enough to contain the euro-zone debt crisis.
The Dow Jones Industrial Average dropped 142 points, or 1.3%, to 10951, trading at lows not seen since October. Kraft was among the Dow's hardest-hit components, off 1.5%, as the food giant launched arbitration proceedings against Starbucks, challenging the coffee giant's plan to end a distribution deal with Kraft. Starbucks, which is not a Dow stock, fell 2.7%.
Among the Dow's other decliners, Hewlett-Packard fell 1.9%, Home Depot fell 1.4% and Caterpillar shed 1.3%. But its financial components helped limit the drop, with Bank of America climbing 1% and J.P. Morgan Chase edging up 0.4%.
The Nasdaq Composite fell 1.3% to 2501. The Standard & Poor's 500-stock index dropped 1.1% to 1176, with all its sectors in the red.
The declines came as investors continued to worry about the euro-zone debt situation even after Europe sealed a EUR67.5 billion ($89.43 billion) bailout of Ireland Sunday and for the first time crafted a blueprint for rescues from 2013 on that could have private-sector creditors bearing some of the cost. Counting Ireland's own contribution, which is coming out of the state's treasury and its pension-reserve fund, the total package is EUR85 billion, or $112.61 billion.
"It seems to be certainly a rescue, but one that does impose some longer term costs," said Craig Peckham, equity trading strategist at Jefferies. "The fact that you've got a rescue package here that's being funded in not insignificant portion from the Irish government including the pension, that actually winds up contributing to a larger drag on the overall Irish economy. That sort of rescue pattern is not something that seems to be sitting terribly well with the marketplace overall."
Concerns remain as to whether Portugal or even Spain will also need help refinancing their debts. Those worries helped drive the euro lower to $1.3099 while the costs to insure the debt of Portugal and Spain against default climbed.
"The real fear is Portugal and Spain," said David Hefty, chief executive of Hefty Wealth Partners. He noted the price of Ireland's bailout is actually smaller than the U.S. government's bailout of insurance giant American International Group, but if Portugal and Spain also need bailouts on top of those Ireland and Greece agreed to, "that's the major headwind or concern that we see in the market right now."
Adding to the worries, the European Commission said it expects weak global markets and government efforts to cut deficits to bring a "gradual and rather uneven" recovery across the bloc's 27 member states.
Investors flocked to the dollar for safety. The U.S. Dollar Index, tracking the U.S. currency against a basket of six others, climbed 0.8%.
Treasurys were mixed, with declines in the two-year note lifting its yield to 0.52% while increased demand for the 10-year note pushed its yield down to 2.84%. Crude-oil futures climbed above $85 a barrel while gold futures edged higher.
Investors failed to be encouraged by data showing business conditions in Texas-area manufacturing production turned much more positive this month, and expectations--especially on jobs--surged.
Among stocks in focus, online retailer Amazon.com climbed 0.8% on optimism for Cyber Monday sales, after the Black Friday shopping weekend signaled a rosier holiday season than last year. A record 106.9 million shoppers are expected to hit retailers' websites Monday, up 11% from last year, according to a National Retail Federation survey.
However, most other retail stocks fell despite the strong start to the holiday shopping season. Nordstrom dropped 3.5%, Best Buy shed 3.2%, Macy's lost 2.9% and Big Lots declined 2%.
-By Donna Kardos Yesalavich, Dow Jones Newswires; 212-416-2188; donna.yesalavich@dowjones.com
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