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Markets were rattled for the third consecutive day after concerns emerged over the stability of Italy’s banking sector. Just after the markets managed a finish in the green last week after six-consecutive weeks of losses, benchmarks once again ended in negative territory for the week. Positive economic data failed to drive the markets up amid disappointing reports from the technology sector.

The Dow Jones Industrial Average (DJIA) inched down slightly by less than a percent to settle at 11,934.58. The Standard & Poor 500 (S&P 500) shed 1.2% to close at 1,268.45. The tech-laden Nasdaq Composite Index finished the day at 2,652.89, declining by 1.3%. Consolidated volumes were notably high for the day, which according to the analysts were caused by a rebalancing of the Russell 2000 index. On the New York Stock Exchange, Amex and Nasdaq, 9.26 billion shares were traded against the daily average of around 7.57 billion recorded till now this year. On the NYSE, for every 19 stocks that declined, 11 stocks moved up. The fear-gauge CBOE Volatility Index (VIX) soared 9.4% to 21.10. The markets also ended in the red for the week and the Dow, S&P 500 lost 0.6% and 0.2%, respectively but the Nasdaq gained 1.4%.

Among the 30 Dow components only three stocks, Boeing Co. (NYSE:BA), EI DuPont de Nemours & Co. (NYSE:DD) and Kraft Foods Inc. (NYSE:KFT) managed to move up, gaining 0.01%, 1.3% and 1.0%, respectively. The Dow plunged below the psychological level of 12, 000, spurring negative sentiments. The S&P 500 lost points for three consecutive days and energy and technology led the decline on Friday. However, it managed to maintain its 200-day moving average, which is a positive sign.

The bearish sentiment was primarily caused by euro-zone financial concerns as Italy joined the group among the European nations which have stoked investors concerns. Ratings agency Moody’s Investors Service has put more than a dozen of Italian banks under review, a move which has stoked bearish sentiments. Last week, the agency had put the nation’s sovereign debt on review that could possibly result in a downgrade, and according to the agency this activated the reviews of the banks for a possible downgrade.

Late Thursday, Moody’s modified its outlook on more than a dozen Italian banks and warned of a possible downgrade in the long-term debt ratings of another 16 banks. Major banks like Banco Popolare Societa Cooperativa, Intesa Sanpaolo, and Banca Monte dei Paschi di Siena are facing close scrutiny. Fears of a possible downgrade have led to concerns about an ensuing global financial crisis. Experts have opined that the review has been triggered by rumors that the banks may fare poorly in the European stress tests scheduled for next month.

Meanwhile, Greek Prime Minister George Papandreou faces a huge task when he attempts to pass the austerity plan that is an absolute necessary to prevent a debt default. Last week, Greece, the European Union and the International Monetary Fund had agreed to a five-year austerity plan. The austerity plan has faced opposition from several quarters and even members of the government had showed their dissent. The nation needs the 12 billion euros to clear its bills and prevent a debt default. IMF and the EU had strictly maintained that in order to receive the bailout package, Greece would have to adhere to the austerity measures. As Greece’s parliament kick-starts on Monday, a lot is at stake as it debates and votes on the austerity plan.

The tech sector was a major laggard for the broader markets, mainly due to disappointing results from Oracle Corp. (NASDAQ:ORCL) and Micron Technology Inc. (NASDAQ:MU) and the shares declined 4.1% and 14.5%, respectively. Among the other bellwethers that declined were Intel Corporation (NASDAQ:INTC), Dell Inc. (NASDAQ:DELL), Microsoft Corporation (NASDAQ:MSFT), Cisco Systems, Inc. (NASDAQ:CSCO), Broadcom Corp. (NASDAQ:BRCM) and NVIDIA Corporation (NASDAQ:NVDA) and they dipped 2.4%, 2.1%, 1.3%, 3.5%, 1.7% and 2.9%, respectively.

Economic data came in stronger than expected on Friday, but failed to drive the markets higher. The Commerce Department reported new orders for manufactured durable goods had surged 1.9% or $3.6 billion to $195.6 billion in May. The report further stated: “This increase, up two of the last three months, followed a 2.7 percent April decrease. Excluding transportation, new orders increased 0.6 percent. Excluding defense, new orders increased 1.9 percent. Transportation equipment, also up two of the last three months, had the largest increase, $2.7 billion or 5.8 percent to $49.6 billion. This was due to non-defense aircraft and parts which increased $2.7 billion”. The Commerce Department also revised its estimate for economic growth or GDP to 1.9% for the first quarter, higher than the last revision of 1.8%.

 
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