NEW YORK — Stocks closed lower Tuesday following new worries about Europe’s debt problems. Treasury prices rose and gold settled at a new high as investors sought out safe assets.
European stocks fell after news reports said banks there may have more risky government debt on their books than was disclosed during “stress tests” earlier this year. That could mean more capital-raising by the banks to bolster their balance sheets.
“The soundness of stress tests are, and continue to be, in question,” said Brian O’Reilly, president of the Collingwood Group.
Uncertainty about the tests could be a drag on the market until European regulators provide more transparency about exactly what figures were included in the tests, O’Reilly said. Shares of European banks mostly fell, and the dollar rose against the euro.
The reports renewed worries about Europe’s government debt, which had flared up earlier this year after a fiscal crisis in Greece that spread to other weak European economies, including Portugal, and helped bring stock prices down worldwide.
The Dow Jones industrial average fell 107.24, or 1.0 percent, to close at 10,340.69. The S&P 500 lost 12.67, or 1.1 percent, to 1,091.84, while the Nasdaq fell 24.86, or 1.1 percent, to 2,208.89.
Volume often starts to pick back up after Labor Day when traders return from summer vacations. But Brian Peardon, a wealth adviser at Harrison Financial Group, said many investors might continue to stay out of the market even when they get back because of uncertainty about the global economy.
“It’s very tough for the public to decipher what’s happening,” Peardon said.
Several reports this week could shed more light on the U.S. economy, including the “beige book” report from the Federal Reserve coming out today and weekly unemployment numbers due out Thursday.
“What it’s going to take to keep (a rally) going is more good news,” said James Angel, professor of finance at Georgetown University’s McDonough School of Business.
Economic data continue to show the economy is growing, but the pace of that growth is uncertain.
The inconsistency in economic reports has left traders overreacting to every bit of news released, Angel said. Stocks last week got a big lift after better-than-expected reports on manufacturing and employment after falling for nearly all of August.
