US stocks end lower as rally fizzles; European bourses gain

NEW YORK — Wall Street stocks finished decisively lower on Monday after an early rally fizzled and was replaced by selling amid lingering worries over slowing earnings growth and anxiety about US elections.

The reversal came after European equities advanced, in part due to relief that Italy avoid a credit rating downgrade from S&P last week.

US stocks opened firmly higher but the rally began fading in late morning before turning sharply negative in the last 90 minutes of trading. The Dow was down more than two percent and the Nasdaq more than three percent before staging a partial comeback ahead of the finish.

The Dow Jones Industrial Average ended down 1.0 percent at 24,442.92, after experiencing a swing of more than 900 points between its session peak and nadir.

US stocks have been under pressure all month, due in part to worries that the United States is exiting a period of peak earnings as the economy feels the weight of higher Federal Reserve interest rates. 

Analysts also pointed to a midday report from Bloomberg News on Monday that President Donald Trump's administration planned more tariffs on China if talks between Trump and Chinese President Xi Jinping next month are unsuccessful.

"The inability of the market to hold the rally is keeping people out of the market," said Karl Haeling of LBBW, who said uncertainty over the approaching congressional elections was adding to the skittishness.

"As we get to the November 6 election, people don't want to do anything new on the market," Haeling said.

"The market is really nervous," said Adam Sarhan of 50 Park Investments. "Investors have been selling on strength whenever the market rallies." 

European stocks advance

Earlier, equity markets throughout Europe had advanced as S&P refrained from cutting Italy's credit rating even as it cut the outlook on the country. Milan's FTSE Mib closed the day 1.9 percent higher.

European stocks also benefited from reports that China was weighing a tax cut on auto purchases, boosting shares of Germany's Volkswagen, Italy's Fiat and France's Renault. 

Frankfurt gained 1.2 percent despite new questions over Germany's leadership. Angela Merkel on Monday announced she would quit as German chancellor when her mandate ends in 2021 following a weak performance by her coalition in a regional poll over the weekend. 

In Britain, Chancellor of the Exchequer Philip Hammond forecast the economy would grow 1.6 percent next year when the country exits the European Union, as he delivered his last annual budget before Brexit. The government had previously forecast 1.3 percent growth.

London's FTSE 100 index gained 1.4 percent.

The British government also said it would introduce a new tax for tech giants from 2020, a move that helped pressured large US tech companies. Amazon slumped 6.3 percent, Google-parent Alphabet 4.8 percent and Netflix 5.0 percent.

Dow member IBM dropped 4.1 percent after announcing a $34 billion takeover of open source software company Red Hat, while Red Hat surged 45.4 percent.

Fellow Dow member Boeing dropped 6.6 percent following a fatal crash of all 189 passengers operated by Indonesian Lion Air on a Boeing-737 MAX. Boeing is seen as vulnerable to further tariffs if the US-China trade dispute worsens.