LONDON (Reuters) – Weakness in banks and commodity stocks dragged Britain's leading share index lower on Monday as the protracted search for a Greek bond deal and concerns about economic growth kept investors nervous.

The FTSE 100 (.FTSE) index closed down 62.36 points, or 1.1 percent, at 5,671.09, extending Friday's falls and retreating further from Thursday's six-month closing high.

The FTSE volatility index (.VFTSE) was also active, up over 10 percent, its biggest daily percentage rise in a month and signaling an increase in risk aversion.

Banks (.FTNMX8350) were the biggest blue-chip casualties, hit by concerns that extra liquidity injections from central banks had not addressed the sector's fundamental problems.

Credit Suisse reduced its recommendation on the European Banking sector to "underweight" as it said the direct earnings impact of the European Central Bank's (ECB) late-December splurge of cheap, long-term cash for the banks appeared to be over-estimated.

Barclays (BARC.L) was the UK sector's biggest faller, down 4.2 percent, while Lloyds Banking Group (LLOY.L) shed 4.1 percent, and Royal Bank of Scotland (RBS.L) fell 3.5 percent.

EU leaders met in Brussels on Monday, the first summit of 2012, to sign off a permanent rescue fund for the euro zone — Britain's biggest trading partner — though the meeting was overshadowed by the unresolved Greek debt problems.

To avoid a chaotic default, which could have grave ramifications for sentiment and financial systems across the globe, Greece must secure a deal with its private bond holders and persuade international lenders it is serious about reforms in order to secure much-needed cash.

Fresh tensions between Greece and the euro zone's biggest economy Germany over the weekend regarding the debt bail-out terms also knocked sentiment.

"This isn't the first time Greece has shown resistance to accepting certain EU bailout terms and conditions, and given their weak position they may need to concede again, otherwise risk defaulting on the debt repayments due in March," said Jordan Lambert, Trader at Spreadex.

U.S. blue chips (.DJI) were down 0.6 percent by London's close, also suffering on concerns over the Greek debt situation, and after further dull U.S. economic data.

U.S. consumer spending was flat in December as households took advantage of the largest rise in income in nine months to boost their savings, setting the tone for a slowdown in demand early in 2012.

COMMODITIES DIP

Weakness in commodity issues also weighed on blue chips in London, with a retreat in crude knocking the integrated oils (.FTNMX0530) as an expected Iranian vote to suspend crude exports to Europe was postponed, easing supply concerns.

Miners (.FTNMX1770) also moved lower in tandem with weaker metal prices, as softer-than-expected U.S. economic data fuelled concerns about demand levels.

Defensive stocks dominated on the short list of blue chip gainers, led by drugmakers, with AstraZeneca (AZN.L) and GlaxoSmithKline (GSK.L) up 0.6 percent and 0.5 percent.

AstraZeneca will post fourth-quarter results on Thursday.

Utilities were in demand, with energy generator International Power (IPR.L) up 0.6 percent, and power distributor National Grid (NG.L) ahead 0.5 percent. Both firms are due to issue trading updates later this week.

And chip designer ARM Holdings (ARM.L) gained 0.3 percent, with its fourth-quarter results due tomorrow.

(Reporting by Jon Hopkins; Editing by Will Waterman)

NEW YORK (Reuters) – U.S. stocks rose on Thursday, putting the S&P on track for its third straight advance after earnings from Bank of America and Morgan Stanley lifted financials and strong demand at European bond auctions eased concerns over Europe.

Bank of America Corp (BAC.N) climbed 4.6 percent to $7.11 and was the top boost to both the benchmark S&P and the Dow Industrials. The bank swung to a fourth-quarter profit, helped by one-time items and lower expenses for bad loans. Morgan Stanley (MS.N) reported a quarterly loss that was narrower than expected, sending shares up 4.5 percent to $18.13.

With Wednesday's forecast-topping earnings from Goldman Sachs Group Inc (GS.N), results from the three big financials lessened some concerns about the sector's exposure in debt-strained Europe.

Some analysts would not be surprised by a pullback in the S&P 500 from highs not seen since last July, especially after recent weak results from JPMorgan Chase & Co (JPM.N) and Citigroup Inc (C.N).

"No question we've seen some encouraging news with earnings and Europe, but the question is whether we're getting ahead of fundamentals," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, Ohio.

"Clearly things have improved, but it remains to be seen if there really has been a turn, or if this is just a January thaw ahead of more winter storms," McCain said. "There are still a lot of parts of the world with significant problems and concerning trends."

The Dow Jones industrial average (.DJI) was up 15.89 points, or 0.13 percent, at 12,594.84. The Standard & Poor's 500 Index (.SPX) added 4.99 points, or 0.38 percent, at 1,313.03. The Nasdaq Composite Index (.IXIC) gained 20.39 points, or 0.74 percent, at 2,790.10.

Financial shares have rallied since the start of the year. The S&P financial index (.GSPF) is up 8 percent for 2012, helping to push the S&P 500 up more than 4 percent. The financial index was up 0.7 percent for the session.

In a sign of optimism about Europe, Spain and France both drew strong demand at government debt auctions.

The Nasdaq got a boost from eBay Inc (EBAY.O), which reported better-than-expected results after the close on Wednesday. The stock was up 4.2 percent to $31.63.

After the close, quarterly reports are due from technology bellwethers Google Inc (GOOG.O), International Business Machines Corp (IBM.N), Intel Corp (INTC.O) as well as Microsoft Corp (MSFT.O).

Transportation stocks moved higher after Union Pacific Corp (UNP.N) reported higher quarterly profit and revenue that beat estimates. Union Pacific was up 3 percent to $113.05, while the Dow Jones Transportation Average (.DJT) gained 1.8 percent.

The number of Americans filing for new jobless benefits dropped to a near four-year low last week and factory activity in the Mid-Atlantic expanded, suggesting the economy maintained its momentum early in the year.

However, housing starts dipped, indicating the sector was still a ways from strengthening.

(Reporting By Ryan Vlastelica; editing by Jeffrey Benkoe)

NEW YORK – A rare disappointing earnings report from JPMorgan Chase battered bank stocks on Friday and helped push the rest of the market lower. Rumors of imminent downgrades for the credit ratings of European governments drove the euro down and sent investors streaming into U.S. debt.

The Dow Jones industrial average fell 48.96 points to close at 12,422.06, a drop of 0.4 percent. Markets were little changed late in the day after France’s finance minister confirmed that Standard & Poor’s had stripped the country of its AAA credit rating.

Before the market opened, JPMorgan said quarterly profit declined 23 percent from a year earlier, slightly worse than what analysts expected. The bank’s stock lost 2 percent, and other large banks followed. Morgan Stanley fell 3 percent and Goldman Sachs 2 percent.

It was the first time JPMorgan missed Wall Street expectations since the final quarter of 2007, a period that includes the financial crisis of 2008 and 2009. JPMorgan is widely considered one of the best-managed big banks. Traders figured that if JPMorgan had trouble as 2011 came to a close, the rest of the industry probably did, too.

“JPMorgan is the gold standard,” said Phil Orlando, chief equity strategist at Federated Investors. “So what happens to the banks that aren’t quite as strong and aren’t quite as well-managed?”

On trading desks, it’s called the “cockroach theory,” Orlando said. “You never see just one cockroach. If you see one, you know there’s bound to be a lot more.”

The euro slipped to its lowest level in 17 months after reports surfaced that S&P would downgrade European governments. After the markets closed in New York, S&P announced cuts for France, Austria, Italy and Spain.

The euro dropped 1.1 percent against the dollar to $1.27. Borrowing costs jumped for France, Italy and Spain, countries at the center of the region’s debt crisis.

The dollar and U.S. Treasury prices rose as investors moved money into lower-risk assets. The yield on the 10-year U.S. Treasury note fell to 1.86 percent from 1.93 percent late Thursday.

S&P warned Dec. 5 that 15 countries that use the euro were at risk of downgrades, citing higher borrowing costs for top-rated governments and disagreements among European leaders.

A cut to France’s credit rating may fail to push rates up for France because bond traders were prepared for it, said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

The danger is to the European rescue fund. France is the second-largest contributor to the fund behind Germany. Bond traders could respond to the French downgrade by raising borrowing costs for the rescue fund, in the expectation that its rating will be cut next.

“The knock-on effects are far more significant than the impact on France itself,” LeBas said.

JPMorgan’s results opened the earnings season for banks on a sour note. Though an increasing pace of earnings reports may help steer the markets over the coming days, Europe’s debt crisis is likely to remain the focus.

In other trading, the S&P 500 index fell 6.41, or 0.5 percent to 1,289.09. The Nasdaq composite index fell 14.03, or 0.5 percent, to 2,710.67. Even with Friday’s fall, all three indexes posted gains for the second straight week. The S&P 500 index is up 2.5 percent to start the year.

Among stocks making larger moves than the overall market Friday:

• Diamond Foods Inc., which makes Emerald Nuts, plunged 10 percent after The Wall Street Journal reported that federal prosecutors had opened a criminal inquiry into its financial practices. The Journal also reported that two large shareholders had dumped most of their stakes in the company.

• Safeway Inc., the grocery store chain, rose 1.8 percent. An analyst at Jefferies placed a “buy” rating on the stock on the expectation that the company will benefit from an improving job market, especially in California.

• Alpha Natural Resources fell 10 percent, the largest loss in the S&P 500. The coal company bought Massey Energy last year, and the Justice Department is considering whether to prosecute the people who ran Massey when its Big Branch mine exploded in 2010.

Jan 9 (Reuters) – The Securities and Exchange Commission has urged banks to publish more details about their exposure to European sovereign debt, a factor in the recent bankruptcy of the futures brokerage MF Global Holdings Ltd (MFGLQ.PK).

In guidance issued on Friday, the regulator's Division of Corporation Finance said disclosures by publicly-traded financial institutions have been "inconsistent in both substance and presentation."

It said this could make it harder for investors to discern how much risk the banks are taking, both individually and relative to each other, and how the exposures will affect operating results or financial health.

The SEC urged that banks reveal direct and indirect exposures "separately by country, segregated between sovereign and non-sovereign exposures."

It said they should also provide more details on hedging, through such instruments as credit default swaps, and sums they might need to raise if forced to close out their positions.

"In determining which countries are covered by this guidance, registrants should focus on those experiencing significant economic, fiscal and/or political strains such that the likelihood of default would be higher than would be anticipated when such factors do not exist," the SEC said.

The non-binding guidance was issued about two months after MF Global filed for bankruptcy protection, amid a liquidity crunch spurred by investor and customer worries about its $6.3 billion bet on sovereign debt from Belgium, Ireland, Italy, Portugal and Spain.

MF Global had revealed that exposure in the prior week.

Worries about European debt exposure have also weighed on the stocks of Morgan Stanley (MS.N) and the investment bank Jefferies Group Inc (JEF.N).

The SEC is trying to learn more about some of the more opaque means that banks use to reduce the risk of credit losses, including derivatives and off-balance-sheet financings. This could reduce the threat of further liquidity shortfalls.

An SEC spokesman declined to comment.

Another regulator, the Financial Industry Regulatory Authority, has stepped up oversight of leverage at brokerages after concluding that MF Global had not been fully candid in disclosing its European debt exposure as little as one month prior to the bankruptcy.

Jon Corzine, a former New Jersey governor, stepped down as MF Global's chief executive on November 4, four days after the New York-based company's bankruptcy filing. (Reporting by Jonathan Stempel in New York; Additional reporting by Carrick Mollenkamp in New York and Sarah N. Lynch in Washington, D.C.; editing by Carol Bishopric)

NEW YORK (Reuters) – U.S. stocks fell slightly on European debt worries on Thursday, but technology and financial shares rose on data pointing to a strengthening U.S. economy.

Financial shares were the day's top gainers in volatile trading on Wall Street. At the same time, Europe's bank stocks fell on worries over their ability to raise capital amid a sovereign debt crisis.

Data signaled improvement in the U.S. labor market. More than twice the expected number of private sector jobs were added in December while initial jobless claims dropped 15,000 in the latest week. In addition, the pace of U.S. services growth quickened more than expected in December.

"The idea from the data is that our economy is picking up, so for banks, they'll start to see some loan growth, which will feed into their profits," said James Dunigan, chief investment officer at PNC Wealth Management in Philadelphia.

"That's different than concerns about capital and stability in Europe, which the region is still dealing with," added Dunigan, who helps oversee $105 billion.

European banks (.SX7P) fell 3.2 pct while the KBW Banks index (.BKX) rose 1.2 percent. Bank of America Corp (BAC.N) advanced 5.3 percent to $6.12.

Despite solid demand for a French government debt sale, investors fretted about more fragile economies, such as Italy and Spain. The euro, which has been closely correlated to global equities, fell to a 15-month low against the dollar on Thursday.

The Dow Jones industrial average (.DJI) was down 42.23 points, or 0.34 percent, at 12,376.19. The Standard & Poor's 500 Index (.SPX) was down 1.48 points, or 0.12 percent, at 1,275.82. The Nasdaq Composite Index (.IXIC) was up 7.20 points, or 0.27 percent, at 2,655.56.

The Nasdaq was boosted by strength in tech shares. Marvell Technology Group (MRVL.O) gained 5.4 percent to $14.95 while Seagate Technology (STX.O) was up 5.4 percent to $17.72.

The S&P retail index (.RLX) fell 0.6 percent as December sales rose, though discounts cut into profits over the holiday shopping season. Target Corp (TGT.N) fell 3.5 percent to $48.26 while Macy's Inc (M.N) added 1.9 percent to $33.27.

Dendreon Corp (DNDN.O) shares jumped 41.5 percent to $10.76 after the biotechnology company reported a more than three-fold jump in revenue of its prostate cancer vaccine.

But bookstore owner Barnes & Noble Inc (BKS.N) shares fell 24.4 percent to $10.21 after the company said it is considering splitting off its Nook electronic reader business and also cut its full-year earnings forecast.

(Reporting By Ryan Vlastelica; Editing by Kenneth Barry)

Stocks fell Thursday as renewed concern about Europe outweighed positive jobs news in the U.S. The euro fell to a 15-month low against the dollar and stocks fell sharply in Italy and Spain.

The Dow Jones industrial average fell 122 points, or 1 percent, to 12,297 in morning trading. The S&P 500 index fell 11 points to 1,266, and the Nasdaq fell 13 points to 2,635.

Stocks were down sharply in European countries with the biggest debt problems. Indexes in Italy, Greece and Spain fell more than 2 percent. Markets in the bigger, more stable economies of Britain, Germany and France fell slightly. The euro dropped to $1.28, its lowest level since September 2010.

Barnes & Noble plunged 25 percent after the book store chain lowered its profit forecast and said it might separate its electronic book and reader business from its bricks-and-mortar bookstores. The company’s Nook reader has been positioned as a competitor to Amazon Inc.’s hugely successful Kindle and Apple Inc.’s iPad.

In the U.S., the Labor Department reported another drop in the number of people seeking unemployment benefits. Payroll processor ADP said private employers added 325,000 jobs last month. The two reports signal further, though not dramatic, improvement in the U.S. jobs market.

Investors shrugged off the U.S. jobs news and looked abroad, worried about Europe’s banks. On Wednesday, Italy’s largest bank, Unicredit, said it was selling new stock at a steep discount to raise $9.7 billion to meet new requirements for banks to keep thicker financial cushions against losses. UniCredit fell 10 percent Thursday.

In U.S. corporate news:

• Constellation Brands Inc. fell 4.7 percent after the beverage maker said its third-quarter income dropped 25 percent on weaker wine and beer sales in North America. The company makes Robert Mondavi wine and Svedka vodka.

• Tesoro Corp. plunged 7 percent. The Texas oil refiner said it would report a loss for the final three months of 2011. Tesoro said rising prices for crude oil drove up refining costs at the same time gas prices were falling.

Earlier in Asia, Japan’s Nikkei 225 index fell 0.8 percent. Mainland China’s benchmark Shanghai Composite Index lost 1 percent to its lowest level in almost three years.

LONDON – The euro fell to a fresh 15-month low against the dollar Thursday while stock markets continued to give up some of their early-year gains as European debt concerns offset mounting optimism over the state of the U.S. economy.

For a second day running, the concern in the markets has centered on the state of Europe’s banks following UniCredit’s announcement Wednesday that it was selling new shares at a large 69 percent discount to Tuesday’s closing price.

UniCredit is trying to raise euro7.5 billion ($9.7 billion) to meet new European requirements for banks to thicken their financial cushions against possible losses. UniCredit’s share price was down another 10 percent Thursday, following a near 15 percent decline the day before.

Italy, the recent focus of the debt crisis, must borrow to cover euro53 billion ($69 billion) in expiring debt in the first quarter alone in debt auctions beginning Jan. 13. That will test whether the government of new Prime Minister Mario Monti is making progress in regaining market confidence through budget cuts and efforts to improve weak economic growth.

Banks are an integral part of the debt crisis because they hold government bonds. A default or steep fall in the value of government bonds could inflict heavy losses on banks and choke off credit to the European economy. That’s why regulatory authorities want Europe’s banks to raise their buffers by euro115 billion (149 billion) over the next few months. The worry in the markets is that banks will have to offer sharp discounts.

The economic slowdown will also keep pressure on lenders in Europe. Spain’s economy minister told the Financial Times he expects the country’s banks to have to set aside anoter euro50 billion in provisions to cover the costs of bad property loans. The comments caused Spanish banks stocks to slide and contributed to losses in other countries. France’s Societe Generale SA was down 4 percent, for example.

“European bank stocks are under pressure and UniCredit shares were suspended after a 14 percent fall yesterday was compounded by an 8 percent fall today,” said Adam Cole, an analyst at RBC Capital Markets. “The latter was the immediate catalyst for euro weakness and well-received European debt supply did little to offset the damage.”

France became the latest euro country to sell off a large chunk of bonds in a relatively troublefree manner, though its borrowing rates edged up and demand slipped from earlier auctions. France’s bond markets are a particular focus for investors because credit ratings agencies have threatened to cut the country’s cherished triple-A rating.

In total, France sold euro7.96 billion ($10.31 billion)of its bonds at affordable rates. Of the issues on offer, most interest centered on the euro4 billion in ten-year notes, for which the results were mixed. It had to pay a rate of 3.29 percent, up from December’s equivalent rate of 3.18 percent, and demand was lackluster — the bid to cover ratio, a gauge of investor demand, was only 1.643 as against 3.046 last time.

Germany had also seen a drop in demand for its bond issues this week, with demand for euro4.06 billion of its ten-year bonds issued on Wednesday only barely covering what was on offer.

As investors’ risk appetite waned, following a surprisingly buoyant start to the year, the euro took a battering. Weaker than expected eurozone industrial orders in October — up just 1.8 percent after September’s dramatic 7.8 percent decline — helped send the euro down to $1.2832, its lowest level since September 2010.

European stocks likewise fell, though most indexes remained higher for the year so far. Germany’s DAX was down 0.8 percent at 6,062 while the CAC-40 fell 1.1 percent to 3,157. The FTSE 100 index of leading British shares was 0.7 percent lower at 5,629.

Italy’s FTSE MIB underperformed, trading 1.9 percent, as it continued to suffer the fallout from UniCredit’s pricing of its rights issue.

Wall Street was poised for a fairly weak opening, too — Dow futures were down 0.6 percent at 12,280 while the broader Standard & Poor’s 500 futures fell 0.8 percent to 1,263.

A raft of U.S. economic data later have the potential to shift sentiment, especially if the recent strong run continues. Key releases later include the Institute for Supply Management’s monthly survey of the services sector as well as indicators on the pace of hiring in the private sector.

The latter may affect market expectations for Friday’s closely-watched nonfarm payrolls data for December. The figures often set the market tone for a week or two after their release. The expectation is that the U.S. economy generated around 150,000 jobs during December.

That would represent a further steady, if unspectacular, improvement in the U.S. jobs market.

Earlier in Asia, Japan’s Nikkei 225 index fell 0.8 percent to close at 8,488.71. South Korea’s Kospi index lost 0.1 percent at 1,863.74, while Hong Kong’s Hang Seng Index rose 0.5 percent to 18,813.41. Benchmarks in Singapore and Taiwan were also higher.

Mainland China’s benchmark Shanghai Composite Index lost 1 percent to 2,148.45, its lowest level in almost three years. The Shenzhen Composite Index lost 3.5 percent to 813.99. More than 100 companies plunged to the daily limit of 10 percent.

Oil prices tracked equities lower even though the EU countries are beginning the process of trying to thrash out an agreement on banning the purchase of Iranian oil in the hope of choking off funding for the country’s nuclear program — benchmark oil for February delivery fell 76 cents to $102.46 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 26 cents to end at $103.22 per barrel on the Nymex on Wednesday.

____

Pamela Sampson in Bangkok contributed to this report.

NEW YORK (Reuters) – Banks dragged the stock market lower on Monday, with losses accelerating late after Bank of America's stock price fell below

$5 for the first time in nearly three years.

Warnings of deteriorating conditions in the euro zone and concerns about tougher capital rules that could cut into big banks' profits pressured the financials throughout the day.

When BofA, the largest U.S. bank, plunged through $5, it ignited a late-day decline in the sector and the broader market, which fell 1 percent. More than 29 million shares of the stock traded, accounting for about 5.4 percent of the day's total trading.

The bank's woes underscore the headwinds buffeting the financial sector on both sides of the Atlantic.

Comments from Mario Draghi, president of the European Central Bank, weighed on sentiment after he said the economic outlook contained substantial downside risks, adding that 2012 would be a difficult year for banks.

"If you add up all the factors facing banks, this just isn't a good environment for financials, and since the lion's share of the worry in the market is related to financials, a bad deal for them means a bad day for everyone," said Mike Shea, managing partner and trader at Direct Access Partners LLC in New York.

BofA closed down 4 percent at $4.99 while JPMorgan Chase & Co (JPM.N) fell 3.7 percent to $30.70 and Citigroup Inc (C.N) slumped 4.6 percent to $24.82.

The Dow Jones industrial average (.DJI) was down 100.13 points, or 0.84 percent, at 11,766.26. The Standard & Poor's 500 Index (.SPX) was down 14.31 points, or 1.17 percent, at 1,205.35. The Nasdaq Composite Index (.IXIC) was down 32.19 points, or 1.26 percent, at 2,523.14.

There were signs that cautious investors were rotating into defensive sectors, with healthcare (.GSPA) and consumer staples (.GSPS) falling the least.

Traders also cited a Wall Street Journal report that the Federal Reserve was keen for U.S. banks to hold more capital than required by U.S. law as weighing on bank shares.

"Anything to monkey around with capital requirements will slow down loan growth and slow down earnings, so any sign of tweaking might have an exaggerated effect on trading," said John Norris managing director of wealth management with Oakworth Capital Bank in Birmingham, Alabama.

After falling nearly 3 percent last week, Monday's losses brought the S&P 500 close to the 1,200 level, cited by traders as an important support level. Losses could accelerate if that level is breached.

"That we're nearing 1,200 is adding a bit of fuel to this fire," Shea said.

Investors eyed developments in North Korea after the death of its leader, Kim Jong-il, and as state-controlled media hailed his untested son as the "Great Successor."

Adding to worries, Fitch warned on Friday it may downgrade the ratings of France and six other euro zone countries, saying a comprehensive solution to the region's debt crisis was "technically and politically beyond reach".

In company news, Winn-Dixie Stores Inc (WINN.O) surged 71 percent to $9.29 after agreeing to go private in a $560 million all-cash deal with Bi-Lo LLC.

More than three-fourths of companies traded on the New York Stock Exchange fell while 76 percent of Nasdaq-listed issues closed in negative territory.

(Reporting by Ryan Vlastelica; Editing by Kenneth Barry)

NEW YORK – The stock market took a late afternoon fall 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 Monday. Morgan Stanley dropped 5.5 percent and Bank of America Corp. sank 4 percent, the biggest fall in the Dow Jones Industrial average.

“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) in new money to the International Monetary Fund. European leaders had pledged the money for a special IMF fund for 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.

Among companies making large moves Monday:

• Winn-Dixie soared 70 percent. The supermarket chain is being sold to Bi-Lo LLC, another supermarket operator with stores in the Southern U.S., in a deal valued at $560 million.

• Cablevision Systems Corp. rose 2 percent after an analyst from Citibank said a recent drop in the company’s stock seemed “way overdone.” The stock has lost 27 percent from the end of October through last Friday following the unexpected resignation of its chief operating officer.

• Bank of America ended the day at $4.99. The drop puts it at risk of further selling pressure because many mutual funds have rules against holding stocks that trade below the $5 mark.

• Commercial Metals Co. dropped 1.4 percent. The company’s board rejected a $1.7 billion takeover bid from investor Carl Icahn, saying the proposed deal undervalued the company.

The three major stock market indexes lost more than 2 percent last week amid worries that some European governments would try to drop the euro. Fitch Ratings warned Friday that it may cut the credit grades for Italy, Spain and four other countries that use the currency.

With two weeks of trading left in 2011, the S&P 500 is 4.2 percent below where it started the year. The Dow has managed to gain 1.6 percent in 2011, led by McDonald’s Corp. and its 26 percent gain.

Nearly four stocks fell for every one that rose on the New York Stock Exchange. Trading volume was very light at 3.6 billion.

NEW YORK – U.S. stocks edged lower in afternoon trading with bank stocks leading the way down.

Stocks opened higher Monday but soon fell after an hour of trading. Cautious comments from the head of the European Central bank soured any hopes the ECB would find a resolution to Europe’s debt crisis anytime soon.

Morgan Stanley fell 5 percent and Citigroup dropped 4 percent. Bank of America Corp. sank 3.6 percent, the biggest fall among the 30 stocks in the Dow Jones Industrial average.

“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.

A report in The Wall Street Journal also said U.S. regulators will likely force U.S. banks to follow stricter rules to shore up their finances. The rules are aimed at keeping banks from failing but would pinch profits.

The Dow fell 51 points, or 0.4 percent to 11,815 as of 2:50 p.m. Eastern time. Pfizer Inc. was the Dow’s leading stock, rising 1 percent.

The Standard & Poor’s 500 index fell 8 points, or 0.6 percent, to 1,212. The Nasdaq composite index fell 16, or 0.6 percent, to 2,539.

Mario Draghi, the ECB president, said that the central bank was looking for ways to keep the Eurozone’s bailout fund effective 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.

A gauge of sentiment among home 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.

Among companies making large moves Monday:

• Winn-Dixie soared 71 percent. The supermarket chain is being sold to Bi-Lo LLC, another supermarket operator with stores in the southern U.S., in a deal valued at $560 million.

• Cablevision Systems Corp. rose 2.7 percent after an analyst from Citibank said a recent drop in the company’s stock seemed “way overdone.” The stock has lost 27 percent from the end of October through last Friday following the unexpected resignation of its chief operating officer.

• Commercial Metals Co. dropped 1 percent. The company’s board rejected a $1.7 billion takeover bid from investor Carl Icahn, saying the proposed deal undervalued the company.

The three major stock market indexes lost more than 2 percent last week amid worries that some European governments would try to drop the euro. Fitch Ratings warned Friday that it may cut the credit grades for Italy, Spain and four other countries that use the currency.

With two weeks of trading left in 2011, the S&P 500 is 3.5 percent below where it started the year. The Dow has managed to gain 2.2 percent in 2011, led by McDonald’s Corp. and its 27 percent gain.