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Stocks zigzag as concerns grow that Italy won't be able to control its debt
NEW YORK (AP) ' Stocks were trading mixed Tuesday morning as investors weighed the prospect that Italy, Europe's third-largest economy, could be the next country to need help managing its debts.
The yields on the government bonds of Italy and Spain have shot up this week as investors lost confidence in the quality of their debt. Some of the concerns about Italy eased Tuesday after a successful auction of new government debt.
Meanwhile, international lenders have not yet confirmed terms for a Greek rescue package. That has reignited concerns that Greece might default on its debt, setting off a chain reaction of European defaults.
The Standard & Poor's 500 index fell less than a point to 1,319 in early trading. The Dow Jones industrial average edged up 3 points to 12,508. The Nasdaq composite fell 6 points, or 0.2 percent, to 2,796.
Investors had assumed Italy would be able to manage its heavy debt load in part because of a high personal savings rate among its citizens. But after concerns arose last week that Italian and Spanish banks might not pass upcoming stress tests, stock in those countries' largest banks fell sharply. Results of the tests are expected to be announced Friday.
At the center of the panic over European government debt is the fear that the European banking systems could be infected. That would affect a global network of financial institutions, potentially freezing up lending and affecting U.S. companies that do business internationally.
Investors are also worried about U.S. debt. The looming Aug. 2 deadline to resolve contentious budget negotiations and signs that the U.S. economy could be in for an extended downturn are also pushing stocks lower.
Alcoa Inc. edged up 0.4 percent after reporting its second-quarter earnings Monday night. The aluminum maker beat analyst expectations for its revenue, but fell short of expectations for net income.
Technology companies were among the weakest in the S&P 500. Microchip Technology Inc. fell 12 percent after the chip make said it expected lower quarterly revenue and income because of waning demand from car makers. That pushed the stocks of other chip makers lower too. Novellus Systems Inc. fell 7 percent, and Texas Instruments Inc. fell 3.9 percent.