Stocks tumble on renewed fears over European debt

By Melinda Peer, TheStreet

Updated at 1:01 p.m. ET

Stocks were trading near session lows Tuesday as European leaders scrambled to address fears of eurozone destabilization in the wake of Greece's surprise call for a referendum on its eurozone bailout package.

The Dow Jones Industrial Average ($INDU) was down 315.1 points, or 2.6%, at 11,639. The S&P 500 ($INX) was losing 37 points, or 2.9%, to 1,216, and the Nasdaq ($COMPX) was off by 84.8 points, or 3.1%, at 2,599.

Stocks fell Monday as investors took profits at the end of one of the strongest monthly performances for stocks in recent years. The Dow gained nearly 1,042 points in October, marking the largest point advance in its history. On a percentage basis, the average rose 9.5% -- its best monthly percentage performance since October 2002, according to Dow Jones Indexes.

Greek Prime Minister George Papandreou surprised global markets late Monday by calling for a referendum on Greece's newly announced bailout package, putting the country at risk for default if voters reject the plan.

French President Nicolas Sarkozy requested an emergency meeting with key ministers to discuss what ripples Papandreou’s move could have on the eurozone, according to a Wall Street Journal report. The referendum comes three days before the G-20 summit that France will host in Cannes.

”This is just a political move and political maneuvers are not likely to derail the implementation of the eurozone plan. Statements from France and Germany seem to suggest that they are determined to enact the plan reached at the Brussels summit,” said Peter Cardillo, chief market economist at Rockwell Global Capital.

”I believe we’ll get some tangible statements out of the G-20 that should help calm some of the market fears. I believe the referendum vote was just a scare tactic. Greece may have to retrack and there probably won’t ba a referendum vote,” Cardillo said, adding, “Investors should take this opportunity and buy the dips.”

Asian markets sold off on the renewed eurozone uncertainty. Japan's Nikkei finished 1.7% lower, and Hong Kong's Hang Seng dropped 2.5%. In Europe, London's FTSE fell 2.3% and Germany's DAX plunged 4.9%.

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The euro was falling 1.18% against the greenback, which was up 1.27% against a basket of currencies, according to the dollar index.

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The stronger greenback continued to dampen the appeal of dollar-priced assets. The December gold contract was losing $24.20 to trade at $1,701 an ounce. Crude oil for December delivery was trading $3.29 lower at $89.90 a barrel.

Tuesday's economic data failed to give markets any boost. Manufacturing activity unexpectedly fell in October to a reading of 50.8 from September's level of 51.6. Economists had expected the Institute for Supply Management's Purchasing Managers' Index to tick up to a reading of 52 in October.

The Department of Commerce said construction spending rose 0.2% in September, which was slightly lower than expected rise of 0.3%. In August, spending jumped 1.6%

The benchmark 10-year Treasury was last gaining 12/32, diluting the yield to 1.994%.

On Monday, trading firm MF Global (MF) became the biggest U.S. casualty from the European debt crisis when it filed for Chapter 11 bankruptcy protection after making bets on European sovereign bonds. The news has been pressuring the financial sector as investors question whether there will be fallout from the firm's collapse. According to The New York Times, MF Global is being investigated after federal regulators discovered that millions in customer funds have "gone missing" in recent days.

Financial stocks were exerting the most pressure on the market. On the Dow. JPMorgan Chase (JPM) and Bank of America (BAC) were the biggest laggards. The Financial Select Sector SPDR ETF (XLF) was off by 7.8%.

In the latest earnings news, Pfizer (PFE) reported better-than-expected​ earnings of 62 cents a share and raised its 2011 guidance. Shares were gaining 1% to $19.47.

Shares of Credit Suisse (CS) were falling 8.8% to $26.40 after the Swiss bank missed analysts' profit projections with third-quarter earnings of 683 million Swiss francs ($769 million). The company also announced it will reorganize its securities division and cut 1,500 more jobs. The reductions are in addition to the 2,000 job cuts Credit Suisse announced in July.

Sirius XM Radio (SIRI) saw its stock tumble 2.5% to $1.75 after the satellite radio company topped third-quarter profit expectations with earnings of 2 cents a share but missed revenue estimates with sales of $763 million.

Anadarko Petroleum (APC) missed Wall Street’s third-quarter profit projections by a penny with earnings of 66 cents a share. The stock was dropping 2% to $76.86.

Members of the Federal Open Market Committee gather for the first of a two-day policy-setting meeting that will end with a rate decision Wednesday afternoon.

The week also offers a look at labor market conditions, with a report on company job growth from Automatic Data Processing on Wednesday and the government's October employment report on Friday. Economists anticipate an increase of 95,000 nonfarm payrolls and an additional 120,000 private payrolls. The unemployment rate is expected to hold at 9.1%.