Wall Street falls following steep rally last week

NEW YORK — After fueling a big rally on Wall Street last week, banking stocks sent the market into reverse Monday.

The Dow Jones industrial average fell 155 points as traders worried that the market, especially the financial sector, had risen too far too fast since early March.

Some of last week’s relief over the reassuring results of the government “stress tests” of 19 big banks evaporated as investors looked ahead.

Four of the banks that Washington determined were already sound enough to survive a worsening in the economy said Monday that they planned to issue shares to help repay government infusions of capital. Although it’s a welcome sign that banks can once again sell stock, the reality of new shares pouring into the market weighed on financial stocks.

But trading volume was light compared with last week. That suggests many buyers were taking a break, not that sellers were out in force.

And technology shares fared better after Microsoft Corp. moved ahead with its first-ever debt offering.

That had some analysts suggesting that the retreat was a natural pause after a two-month run in which the Dow and the Standard & Poor’s 500 index soared 31% and 37%, respectively.

“To take a break here is healthy,” said Scott Fullman, a strategist at WJB Capital Group in New York.

The Dow dropped 155.88 points, or 1.8%, to 8,418.77. The S&P; 500 index slumped 19.99 points, or 2.2%, to 909.24, while the tech-focused Nasdaq composite index slipped 7.76 points, or 0.5%, to 1,731.24.

Even with Monday’s slide, the S&P; is up 34% from early March. But it is still down 42% from its record high in October 2007.

Last week, with the help of financials, the Dow gained 4.4%. The S&P; 500 index rose 5.9% and the Nasdaq gained 1.2%.

An index of 24 banking stocks slumped 7.1% on Monday after surging 36% last week.

Shares of U.S. Bancorp, Capital One Financial, BB&T; and Bank of New York Mellon tumbled after the banking companies said Monday that they hoped to raise as much as $6.8 billion combined by selling their own shares. Regulators told all four companies last week that they didn’t need to increase their capital levels.

U.S. Bancorp dropped 9.9%, Capital One sank 14%, BB&T; slumped 7.6% and Bank of New York Mellon lost 8.1%.

KeyCorp, one of the 10 banks the government said had to raise more capital to protect against possible loan losses, said it would offer up to $750 million worth of its shares. Its shares fell 9.9%.

Technology stocks fared better than the rest of the market after Microsoft moved ahead with plans for its first offering of debt securities. In September the software giant said it could take on as much as $6 billion in debt. The company has more than $25 billion in cash.

Its stock slipped 10 cents to $19.32, while the Nasdaq computer index edged higher.

“When Microsoft comes in and does a deal I think it’s a vote of confidence in technology,” said Nick Kalivas, vice president of financial research at MF Global in Chicago, noting that the company could use the money raised to acquire other tech firms.