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Financial stocks slump on Europe fears and U.S. insider-trading probe

November 22, 2010 | 11:29 am

Financial stocks are weighing heavily on the market Monday, hit by worries about a wider government-debt crisis in Europe and by the U.S. government’s pursuit of an apparently massive insider-trading investigation.

Within the Standard & Poor’s 500 index, the financial sector was the biggest loser among 10 major industry sectors. The financial group was off 1.9% at about 11:20 a.m. PST, while the S&P 500 index overall was down 0.6% to 1,192.34.

Irishprotesrt Ireland’s acceptance on Sunday of a rescue by the European Union drove the euro currency lower after an initial rally, and stock markets across Europe slid on fears that Ireland's capitulation will push other struggling governments to seek bailouts. Portugal, Spain and Italy remain at the top of the list of potential rescue candidates.

The Portuguese stock market slid 1.3%, Spain’s market sank 2.7% and the Italian market fell 1.9%.

Among other concerns, a deepening sovereign-debt crisis raises questions about the ultimate effect on banks that own European government bonds. Shares of Germany’s Deutsche Bank were down 2.7% to $53.99 in U.S. trading. Britain’s Barclays PLC was off 2.9% to $17.15.

Shares of U.S. banks and brokerages, meanwhile, slumped on Europe’s troubles and on news of the wide-ranging federal insider-trading investigation the Wall Street Journal disclosed over the weekend. On Monday the Journal said the FBI was raiding offices of three East Coast hedge funds in connection with the probe.

Fearing a dragnet that could make life miserable for the entire financial sector, investors’ inclination seemed to be to sell first and ask questions later.

Goldman Sachs was down $7.57, or 4.5%, to $159.10, Morgan Stanley lost 90 cents, or 3.5%, to $24.72, Bank of America fell 36 cents, or 3.1%, to $11.30 and JPMorgan Chase dropped $1.08, or 2.7%, to $38.32.

-- Tom Petruno

Photo: A protest in Dublin against the Irish government's decision to seek a financial bailout. Credit: Enda Doran / EPA

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