Stocks Shed More Than 1 Percent

Stocks declined more than 1 percent on Wall Street late on Monday on fears that a divided parliament in Italy would get in the way of the country’s reforms and hamper the euro zone’s stability.

The Standard & Poor’s 500-stock index went from a morning gain to a 1.8 percent loss by the end of trading. The Dow Jones industrial average lost 1.6 percent, or more than 216 points, and the Nasdaq composite index was down 1.4 percent.

Conflicting forecasts of the outcome of Italy’s election raised the possibility of deadlock in parliament, which could in turn paralyze a new government and reignite the euro zone crisis.

In trading on Wall Street, Barnes & Noble stock jumped 12.6 percent after its chairman, Leonard Riggio, said he was considering a bid for the company’s bookstore business.

Stocks have been strong performers so far this year, with the S.&P. 500 up 6.2 percent to around its highest levels since 2007. That has prompted many to predict a pullback, but so far declines have been neutralized as investors use any dip as a buying opportunity. While the S.&P. fell last week, the decline was a slight 0.3 percent and was the first weekly drop after a seven-week string of gains.

“People are cautious about investing near five-year highs, especially given the pace at which we got here, but there’s still room to grow and any pullback should be shallow,” said Robert Pavlik, chief market strategist at Banyan Partners in New York.

The gains have come on strong corporate earnings. With 83 percent of the S.&P. 500 companies having reported results, 69 percent beat profit expectations, compared with a 62 percent average since 1994 and 65 percent over the last four quarters, according to Thomson Reuters data.

Another test for equities will come with the looming debate over big United States budget cuts that will take effect 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.

More government-related uncertainty came from Italy, where a close election left questions about how the country would handle its three-year debt crisis. Still, European shares were higher on Monday, rising about 0.5 percent.

Lowe’s Companies reported earnings that beat expectations, helped by rebuilding efforts after Hurricane Sandy in the United States. Shares were off 2.3 percent.

Dynavax Technologies shares plunged 35 percent after the Food and Drug Administration denied approval for the company’s adult hepatitis B vaccine and sought additional data to evaluate its safety.