The stock market took a late afternoon fall Monday after European Union finance ministers failed to come up with the full amount of money pledged for a bailout fund.
Banks led the way down. Morgan Stanley dropped 5.5 percent, and Bank of America Corp. sank 4 percent, the biggest fall in the Dow Jones Industrial average. The worry looming over banks stocks is that if Europe's debt crisis spins out of control, European banks would fail and damage U.S. banks. Big banks in Europe and the U.S. are linked through the web of global financial markets.
"If Europe is going to be bring us down it's going to come through the financial firms," said J.J. Kinahan, chief derivatives strategist at TD Ameritrade.
The Dow lost 100.13 points, or 0.8 percent to close at 11,766.26. The average lost 55 points in the last hour of trading as reports emerged that the E.U. finance ministers couldn't drum up the full 200 billion euros ($261 billion) they planned to give to the International Monetary Fund. European leaders had pledged the money for a special IMF fund to help struggling European countries at a summit meeting less than two weeks ago.
Cautious comments from the head of the European Central Bank also helped push stocks lower. The Standard & Poor's 500 index fell 14.31 points, or 1.2 percent, to 1,205.35. The Nasdaq composite index fell 32.19 points, or 1.3 percent, to 2,523.14.
Mario Draghi, the ECB president, said Monday that the central bank was looking for ways to keep the Eurozone's bailout fund working even if credit rating agencies strip France of its AAA grade. The bailout fund depends on the top ratings of France, Germany and the countries that contribute to it. Draghi also restated his view that large-scale government bond purchases were outside the central bank's responsibility.
In the U.S., a gauge of sentiment among builders inched up to its highest level since May 2010. The National Association of Home Builders/Wells Fargo builder sentiment index added two points to 21 in December. Any reading below 50 still reflects a negative outlook.
Nearly four stocks fell for every one that rose on the New York Stock Exchange. Trading volume was very light at 3.6 billion.