NEW YORK ( TheStreet) - Stocks sank more than 1% Monday as heightened concerns about the eurozone's debt crisis curbed investors' appetite for risk. The Dow Jones Industrial Average shed 131 points, or 1.1%, to close at 12,381, after trading as low as 12,331 earlier in the session. The S&P 500 fell 16 points, or 1.1%, to close at 1317, and the Nasdaq Composite plunged 44 points, or 1.6%, at 2758.
Fears about the eurozone's sovereign debt crisis were fueled by speculation that Greece may have to restructure its debts, the loss of Spain's Socialist party in regional elections, and the decision by Standard & Poor's to lower its outlook on Italy's debt. The news weakened the euro and strengthened the U.S. dollar , sending oil prices below $98 a barrel. Energy, capital goods and basic materials stocks were Monday's weakest sectors, as investors worried that the global industrial cycle was poised for a slowdown. "There is a bigger story at play here. The problems in Europe have been playing out for over a year now," said James Dailey, chief investment officer at Team Financial Managers. "The trigger for this is a burgeoning slowdown in the global industrials zone, which is why commodities are under pressure." Dailey said the prospect of a slowdown in industrials put the spotlight on Germany, which has till now shown significant strength and has helped mask the problems in the eurozone. "Germany will be disproportionately impacted by a slowdown because it is much more levered to industrials than the United States. Germany's banks are significantly at risk because of their leverage." he said. The FTSE in London lost 1.9%, and the DAX in Frankfurt sunk 2%. On the Dow, all 30 components with the exception of McDonalds ( MCD) ended the session in the red, with Caterpillar ( CAT), Alcoa ( AA) and DuPont ( DD) the biggest laggards.
Asian markets also plunged on Monday on signs that manufacturing activity in China grew at the slowest pace in 10 months in May. The HSBC preliminary Purchasing Managers' Index for China fell to a reading of 51.1 from 51.8 in April. Hong Kong's Hang Seng dropped 2.1%, and Japan's Nikkei closed 1.5% lower.
The July crude oil contract was shedding $2.40 to trade at $97.77 a barrel. Gold for June delivery was up by $6.50 at $1,515.40 an ounce. In the United States, nearly 70 tornadoes ripped through the Midwest over the weekend.
Joplin, Missouri was hit the hardest with a tornado that killed 89 people on Sunday night . Shares of Krispy Kreme Doughnuts ( KKD) jumped 25.7% to $8.05 after quarterly earnings more than doubled on strong sales . Shares of LinkedIn ( LNKD) shed 5.5% to $88.30 after more than doubling last week following its market debut on Thursday as analysts grew wary of the stock's high valuation. Reports that the social networking site has security flaws that could make users vulnerable to hackers also weighed on the stock. Sony ( SNE) saw its stock drop 1.7% to $26.59 after it said it would post a loss of 260 billion yen ($3.19 billion) for its just-ended fiscal year , citing the impact of the March 11 earthquake and tsunami in Japan. Sprint Nextel was the biggest gainer on the S&P 500, with shares climbing 1.8% to $5.57. The benchmark 10-year Treasury was up by 4/32, diluting the yield to 3.130%. The dollar strengthened against a basket of currencies with the dollar index up by 0.9%. . --Written by Melinda Peer and Shanthi Bharatwaj in New York.