Dawn Chorus: US stocks fall amid European debt worries

US equities on Tuesday declined after strong gains last week on concern the European debt crisis may deteriorate, hampering global growth.

The S&P 500 lost 1.2% to 1,092, halting a four-day rally. The Dow Jones Industrial Average retreated 107 points, or 1%, to 10,341. The Nasdaq Composite Index shed 25 points, or 1.1%, at 2,209.

Among the biggest decliners were banks, energy companies and chipmakers. Bank of America and Citigroup shed at least 2%. ConocoPhillips and Chevron declined more than 1.2%. Oracle Corp. gained 5.9% after naming Mark Hurd as president.

Concern about Europe's banks reappeared after the Wall Street Journal said in a report that major lenders understated holdings in potentially risky government debt during tests designed to probe banks' strength.

Also weighing on banks, the Association of German Banks said yesterday the country’s 10 largest lenders may need nearly $134 billion in fresh capital. Adding to the woes, a data released by the German government showed factory orders unexpectedly declined in July as demand in the euro region weakened.

Meanwhile, policy makers in Japan and Australia kept interest rates steady on Tuesday, amid concern that the outlook for US growth is worsening.

In Europe, shares declined yesterday on worries over the strength of the banking sector and the impact of capital reform, while miners fell on renewed alarm over Australia's tax plan.

FTSEurofirst 300 index closed 0.4% lower at 1,062 points. The Euro STOXX 50 was down 1% at 2,727 points. Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC were 0.6% to 1.1%.

In current trading, the Asian indexes are on a downward trend on concern a stronger yen will hurt Japan’s economic growth.

Nikkei 225 Stock Average was down 2% at 9,038 points at 11.30 a.m. local time. Australia’s S&P/ASX 200 Index fell 0.5%. The MSCI Asia Pacific Index shed 0.7% to 121, adding to yesterday’s 0.1% drop.

Shares in China were also treading lower on speculation the European debt crisis is deteriorating and possible new regulations forcing lenders to increase loan-loss reserves will hurt earnings. The Shanghai Composite Index lost 11 points, or 0.4%, to 2,687. Hong Kong’s Hang Seng index fell 0.9%.