* Divided government in Rome could hinder euro-zone reform
* Amgen shares up as competitor recalls drug
* Barnes & Noble rallies as chairman offers to buy part of
* Indexes off: Dow 0.66 pct, S&P 500 0.77 pct, Nasdaq 0.4
By Chuck Mikolajczak
NEW YORK, Feb 25 U.S. stocks fell on Monday,
reversing course from earlier gains as elections in Italy stoked
concerns a divided parliament could disrupt the country's fiscal
reforms and the euro zone's stability.
Early forecasts of the results were conflicting, as opinion
polls indicated the center-left of Pier Luigi Bersani winning
the lower house, but projections from RAI state television
showed Silvio Berlusconi's center right in front in the Senate -
which has equal lawmaking power - but unable to form a majority.
The resulting gridlock in parliament could force new
elections and sent the euro currency lower against both the
dollar and yen.
"Most likely we are looking at a second election, so it's
delayed, but at the margin it is a negative," said Tim Ghriskey,
chief investment officer of Solaris Group in Bedford Hills, New
"The question is, what happens with Italy and that
uncertainty is out there, that is really what you've seen in the
Earlier polls pointing to a center-left victory boosted
stocks in Milan and other European markets, as well as helping
to lift the S&P 500 to a session high of 1,525.84 on optimism
Italy would continue to pay down its debt.
However, the benchmark S&P index remained near highs not
seen in five years, as bets on a stronger U.S. economy have
given equities support. The S&P 500's slight fall last week was
the first weekly drop after a seven-week string of gains to
start the year.
Banks and other financial stocks were among the worst
performers on worries about the sector's exposure to Italy's
massive debt. The KBW Bank Index fell 1.1 percent.
The Dow Jones industrial average dropped 92.14
points, or 0.66 percent, to 13,908.43. The Standard & Poor's 500
Index dropped 11.65 points, or 0.77 percent, to 1,503.95.
The Nasdaq Composite Index dropped 12.65 points, or 0.40
percent, to 3,149.17.
Barnes & Noble Inc shares jumped 10.6 percent to
$14.94 after the bookseller's chairman offered to buy its
declining retail business.
The Nasdaq received support from Amgen Inc, up 4.9
percent at $91.03, after rival Affymax issued a
voluntary recall of its only drug, an anemia treatment that
competes with Amgen's top-selling red blood cell booster,
Epogen. Affymax shares slumped 84.6 percent to $2.55.
The FTSEurofirst-300 index of top European shares
unofficially closed up 0.04 percent and Italy's main FTSE MIB
ended up 0.7 percent after earlier gaining near 4
U.S. equities will face a test with the looming debate over
so-called sequestration, U.S. government budget cuts that will
take effect starting on Friday if lawmakers fail to reach an
agreement over spending and taxes. The White House issued
warnings about the harm the cuts are likely to inflict on the
economy if enacted.
"Sitting out there is the one thousand pound gorilla - the
sequester issue - and certainly nothing is happening there,"
Lowe's Companies Inc lost 1.6 percent to $37.08
after the home improvement retailer posted fourth-quarter
With 83 percent of the S&P 500 companies having reported
results so far, 69 percent beat profit expectations, compared
with a 62 percent average since 1994 and 65 percent over the
past four quarters, according to Thomson Reuters data.
Fourth-quarter earnings for S&P 500 companies are estimated
to have risen 6 percent, according to the data, above a 1.9
percent forecast at the start of the earnings season.