US stocks inch lower, calm returns to market

Calm returned to the stock market Monday after a spasm of fearful selling last week. Major indexes fell modestly, bringing the Standard & Poor's 500 index 10 per cent below its recent peak in April, something traders call a market correction.

The Dow Jones industrial average opened at its lowest level since December after a 275-point sell-off on Friday ignited by grim economic signals, especially a dismal report on the U.S. labor market.

Randy Frederick, managing director of active trading and derivatives at the brokerage Charles Schwab, expects trading to remain slow and steady unless traders are moved by positive news, like a surprisingly strong economic report, or fresh fears about Europe's financial stability.

"When the market goes sideways like this, volume tends to trickle off," Frederick said. "You've got to find a catalyst for people to enter the market, and frankly, I just don't see one right now."

In Europe, bond investors appeared less concerned about the finances of some financially troubled countries. Bond yields fell for Italy and Spain, meaning that they appear less likely to default. Lower bond yields mean decreased borrowing costs for those debt-strapped nations.

The Standard & Poor's 500 index fell nine points to 1,268 as of 12:15 p.m. EDT. The index has fallen 10.6 per cent since its recent peak of 1,419, reached on April 2. Since then, traders have grown increasingly nervous about Europe.

Spain's banks are in shambles, and Cyprus appears close to joining the club of bailed-out countries that already includes Greece, Portugal and Ireland.

Voters in Greek elections this month might choose leaders who intend to reject Europe's bailout money and harsh spending cuts. That could lead to Greece's expulsion from the euro, potentially rattling financial markets.

The Dow fell 58 points to 12,060. The Nasdaq composite index fell 16 to 2,731.

European stocks closed mixed. Asian shares had fallen sharply, extending Friday's selling.

The price of the 10-year U.S. Treasury note fell, lifting its yield to 1.50 per cent. The yield hit a record low of 1.44 per cent on Friday as fears of a global slowdown increased demand for safe investments.

Falling bond yields for Spain and Italy added to signs of growing confidence that Europe can avoid a messy breakup. The euro rose a penny against the dollar, to $1.25. It fell last week to a nearly two-year low against but rose after the May jobs report renewed concerns about the U.S. economy.

Among U.S. stocks making big moves, Chesapeake Energy rose 4 per cent after the company said it would replace four board members. The second-biggest U.S. natural gas company is under pressure from activist shareholder Carl Icahn, who owns a 7.6 per cent stake in Chesapeake.

Homebuilder Lennar fell 4 per cent, following an 8 per cent drop Friday. The stock has dropped 12 per cent in two days after surging 38 percent in the first three months of the year.

Earlier Monday, Asian markets appeared rattled by Friday's U.S. jobs report and signs of slower growth in China. The Shanghai Composite Index fell 2.7 per cent, its biggest slide of 2012.