New York: US and European stocks fell on Friday as news of a criminal investigation into Goldman Sachs weighed on bank shares, while the euro rose broadly on hopes Greece may secure financial aid in the next few days.
Slower-than-expected US economic growth in the first quarter added to investor caution, although other data released later signaled vigor in the economic recovery, sending oil prices higher.
Treasury prices rose as stock losses triggered safe-haven buying and some investors preferred to take risk off the table on the last day of the month.
Shares of Goldman Sachs Group Inc plunged nearly 8% on news that US federal prosecutors are investigating the bank, raising the possibility of criminal charges against the company or its employees.
“The Goldman news could lead investors to believe that there will be more intensive regulation than before, which could put a bit of a dampening effect on financials in general,” said Michael Sheldon, chief market strategist, RDM Financial, Westport, Connecticut.
The investigation comes as the US Senate enters the second day of debate by the full house on a proposed overhaul of financial regulation.
The S&P financial index lost 1.4%.
The Dow Jones industrial average lost 57.89 points, or 0.52%, to 11,109.43, while the Standard & Poor’s 500 Index declined 9.15 points, or 0.76%, to 1,197.63. The Nasdaq Composite Index was down 23.33 points, or 0.93%, at 2,488.59.
Technology stocks fell sharply, with the PHLX semiconductor index 3.7%.
In Europe, shares closed lower for a third straight week. The FTSEurofirst 300 index of top European shares fell 0.72% on Friday, pressured by stocks of banks and oil companies.
Shares of BP dropped 1.49%, extending a fall of recent days as worries intensified about an oil spill from one of the firm’s wells in the Gulf of Mexico.
Barclays closed down 6.4% as results from its investment banking arm, Barclays Capital, disappointed as revenue growth failed to match the lofty levels reported by many rivals.
For the week, the pan-European benchmark index lost 2.7%, and was down 1.5% in the month of April. The index is still up more than 64% from a lifetime low hit on 9 March 2009.
World stocks measured by the MSCI All-Country World Index edged down 0.36%, as gains of 0.6% in emerging-market stocks cushioned the fall in developed countries.
The euro extended recent gains against the dollar, as expectations Greece will soon receive emergency aid helped to quiet jitters about how Athens will pay its debts.
The European single currency was up 0.36% at $1.3272. Still, the euro is down more than 1% in April, its fifth straight month of declines.
“The next week is really a very decisive week for the euro zone as well as for Europe as a whole,” said Tammo Greetfeld, equity strategist at UniCredit in Munich.
People familiar with the Greece aid talks said officials were expected to announce details of the aid package by Monday, but investors were cautious, awaiting details on the plan as well as the reaction in Athens, where angry unions were readying strikes to protest against severe austerity measures.
The anxiety about Greece’s debt negotiations, combined with US stock losses, fed steady safe-haven demand for US Treasuries.
The benchmark 10-year note rose 15/32 in price, with the yield at 3.6743 percent. The 30-year bond was up 20/32 in price, with the yield at 4.5533%.
“We are seeing stocks getting hit, and we still have fears about Greece,” said Thomas Roth, executive director in US government bond trading at Mitsubishi UFJ Securities USA in New York.
The dollar gained 0.19% against the Japanese currency to ¥94.19 after the Bank of Japan earlier on Friday left interest rates unchanged, but unexpectedly released a statement saying policy makers agreed that new efforts to bolster the economy were needed.
Despite the central bank statement, BOJ chief Masaaki Shirakawa said he saw no need to ease policy now, adding that the bank is considering new ways to bolster growth.
US crude oil futures rose 58 cents, or 0.68%, to $85.75 per barrel as data provided more signs of economic recovery. April is set to be the first month since September 2008 when the front-month contract has traded continuously above $80 a barrel.
US GDP growth in the first quarter came in at a 3.2% annual rate, lagging projections for growth of 3.4%, but consumer spending rose, signaling a sustainable recovery is taking hold.
A separate report showing that business activity in the US Midwest expanded more than expected in April added a positive tone on the economy.
Gold prices reached their highest level this year, trading above $1,180 an ounce on a safe-haven alternative amid European debt worries.