US markets plunges on European concerns

The US markets dropped sharply on Monday, denting June gains as pessimism rose about the outcome of a meeting of European leaders this week. There is a growing concern that meeting of European leaders this week, will fail to halt a debt crisis that threatens to drag US corporate earnings to the first decline since 2009. In US, earnings pessimism is reaching levels last seen during the global financial crisis of 2008 and 2009, based on company guidance. Fifty-nine corporations issued profit projections that trailed estimates. Besides, the Commerce Department reported new-home sales climbed to a two-year high in May. Sales of new single-family homes rose 7.6% in May to reach the highest level in more than two years. Purchases of newly built homes climbed to an annual rate of 369,000 last month from 343,000. The April figures were unchanged.

In Europe, German Chancellor Angela Merkel rejected joint euro-area bonds or bills in a speech. Cyprus stated that it will seek a financial lifeline from the euro area’s firewall funds, becoming the fifth of the euro’s 17 member states to seek a bailout. A visit by the international creditors to determine how far Greece has slipped behind on budget targets that underpin access to the international funds was suspended. Greek President Karolos Papoulias will represent the country at this week’s summit. Also, Moody's Investors Service downgraded the long-term debt and deposit ratings for 28 Spanish banks by one to four notches. Among those banks affected were Banco Santander SA, Bankia SA, Banco Popular Espanol SA, and CaixaBank SA. The downgrades follow Moody's cut of Spain sovereign rating to Baa3 on June 13.

The Dow Jones Industrial Average closed lower by 138.12 points or 1.09%, at 12,502.70. The S&P 500 finished the day down by 21.30, or 1.60 percent, to 1,313.72 while the Nasdaq closed down by 56.26 points or 1.95 percent, to 2,836.16.

Most of the Indian ADRs closed in red; ICICI Bank was down 0.74%, Tata Motors was down 0.37%, Infosys was down by 0.24% and HDFC Bank was down 0.18%. On the flip side, Tata Communications was up 0.16%.