By BRENDAN CONWAY
NEW YORK—U.S. stocks fell Monday after European Central Bank President Mario Draghi made cautious comments on the state of Europe's economy and as bank stocks sagged in expectation of tighter capital standards.
The Dow Jones Industrial Average shed 50 points, or 0.2%, to 11817 midsession, after posting a slim advance early in the day. The Standard & Poor's 500-stock index shed 8 points, or 0.6%, to 1212 and the Nasdaq Composite lost 11 points, or 0.5%, to 2544.
Trading volume was light as many investors were closing their books for the year. Just under 1.4 billion shares had changed hands in New York Stock Exchange composite volume as of noon.
The ECB's Mr. Draghi said the region's economic outlook was subject to "high uncertainty" and that substantial downside risks remained. Traders were expecting word on fiscal-consolidation efforts and on International Monetary Fund support for ailing countries from the conference call.
Meanwhile, bank stocks were the weakest performers after The Wall Street Journal reported that the Federal Reserve is set to embrace rules by regulators in Basel, Switzerland, requiring major financial institutions to hold extra capital. J.P. Morgan Chase lost 4.4% and Bank of America shed 3.7% to lead the blue-chip Dow's decliners.
"Markets have lost confidence in the policy makers. They need to do something big to regain confidence," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management. "If they can find a definitive agreement to lend the IMF €200 billion ($260.86 billion), that could at least make people a little less skeptical as to their ability to handle their problems."
European markets were flat or negative. Germany's DAX lost 0.5% while France's CAC 40 clung to a gain of 0.1%.
Last week, the blue-chip Dow shed 318 points, or 2.6%, after credit-rating firms took a negative view of Europe's most recent crisis-contagion efforts and the U.S. Federal Reserve refrained from announcing significant new measures to bolster financial markets.
Caterpillar was one of Monday's strongest blue-chip stocks, rising 0.7% after the machinery company reported that sales of construction and mining machinery rose 30% in the three months to the end of November, higlighted by strong growth in North America.
Asian bourses sank amid fears of fears of political instability following the death of North Korean leader Kim Jong Il, with South Korea's Kospi Composite shedding 3.4% and Japan's Nikkei Stock Average losing 1.3%.
"It's interesting to look at the red coming out of Asia and then see green in Europe and the U.S. The Asian markets saw what I consider a justifiable reaction to a destabilizing event," said John De Clue, senior vice president at U.S. Bank Wealth Management. "As difficult a country as it is, a strong North Korea is better than a weak one, because a weak one implies uncertainty of perhaps extreme proportions."
Gold futures were down 0.3% at $1,593.40 an ounce, while crude oil futures lost 0.2% to $93.32 a barrel. The U.S. dollar edged higher against the euro and the yen.
The economic calendar was light. A reading on home builder confidence in December rose to 21 from a downwardly revised 19 last month, reaching the highest level since May 2010.
In corporate news, AT&T's talks on asset sales to help win regulatory approval for its acquisition of T-Mobile USA have cooled, according to a report in the Wall Street Journal, meaning AT&T may have to abandon the $39 billion deal. AT&T shares lost 0.3%.
Winn-Dixie Stores surged 71%. Grocery-store operator BI-LO agreed to take the grocery chain private in a deal valuing the company at about $560 million.
Saudi Arabia's Prince Alwaleed bin Talal purchased a $300 million investment in Twitter, or about 3.6% of analysts' October valuation of the unlisted social-media site at $8.4 billion.
Alexza Pharmaceuticals gained 4%. The drug company said it had retained adviserLazard to help it explore strategic options after handing all of its employees 60-day layoff notices to conserve cash.
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