Thursday's party is over and investors seemed to wake up with a hangover that left them feeling queasy about the outlook for the European debt crisis.
Today began with the downfall of MF Global Holdings, the futures broker led by CEO Jon Corzine. The company's big bets on European sovereign debt led it to filing for Chapter 11 bankruptcy protection. MF shares were halted.
Separately, the European Central Bank stepped in to buy Italian and Spanish bonds as yield on the debt of the troubled nations soared amid renewed concern that the euro zone's economy was stalling and after Chinese officials sought to dampen expectations on how much China was prepared to invest in Europe.
As a result, last week's euphoria about Europe's progress toward fixing its fiscal disaster gave way to impatience.
"There are lots of missing details and it's still frustrating slow," Kevin Gardiner, the global head of investment strategy at Barclays' wealth unit, told Bloomberg News.
In Europe, the Stoxx 600 Index closed with a 2.2 per cent drop on the day, though still posted a gain for the month of nearly 8 per cent.
In afternoon trading in New York, the Dow Jones Industrial Average fell 1.38 per cent, the Standard & Poor's 500 Index declined 1.44 per cent and the Nasdaq Composite Index shed 1.18 per cent. Even with today's losses, the S&P 500 was still up 12 per cent for the month, heading for its largest monthly percentage gain in more than two decades.
Morgan Stanley and Citigroup each tumbled more than 5 per cent, after the biggest weekly advance in more than a year for financial shares in the S&P 500.
In Japan, the government intervened to stem the rise of its currency and safeguard the appeal of its exports, sending the US currency to the strongest level in three months.
The greenback gained 1.34 per cent against a basket of its major counterparts.
In October, global investors slashed equity holdings to the second lowest level in 12 months, Reuters polls showed on Monday.
- REUTERS surveys of 56 leading investment houses in the US, Japan, Europe ex UK and Britain showed the average stock holding in a balanced portfolio was 49.5 per cent, down from 50.5 per cent in September.
Bonds rose to 35.9 per cent from 34.6 per cent while cash slipped to 5.9 per cent, still the second-highest level of the past 12 months after September's 6.3 per cent, according to the poll.
There is reason for optimism as US corporate profits are by and large exceeding expectations. American companies are beating Wall Street profit estimates for the 11th straight quarter, enough to revive a bull market that analysts say will eclipse any rally in the past 12 years, according to Bloomberg.
A total of 222 out of 298 Standard & Poor's 500 Index companies that reported results since October 11 have surpassed forecasts for the third quarter, according to data compiled by Bloomberg.
"This is looking like it's going to be a really decent quarter," Warren Koontz, head of US large-cap value stocks at Loomis Sayles & Co, told Bloomberg. "Valuations are very, very low relative to history, and you don't have to make heroic assumptions on multiples to get reasonable returns."