Wall Street falls on worries over Italy's budget, trade concerns

By Amy Caren Daniel

(Reuters) - Wall Street declined on Friday, the last trading day of the third quarter, weighed by shares of U.S. lenders as Italy's budget worries roiled financial markets and trade concerns hurt sentiment.

Italy's new government proposed a 2019 budget with a deficit three times bigger than the previous administration's target, sparking a sell-off in European stock markets.

In the United States, banks were hit the hardest with Goldman Sachs, Wells Fargo and Bank of America, Citigroup and JP Morgan trading down between 0.20 percent and 1.20 percent.

Yields on the benchmark 10-year Treasury bonds dipped, while the greenback hit a nine-month high against the euro.

"We are seeing safety trade due to the Italian crisis, people are coming in and buying U.S. paper and the dollar," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

"This concern will probably last for a couple of days, but I don't see it turning into a full-blown crisis. This is an excuse for profit-taking and last minute window-dressing as the quarter draws to a close."

Also weighing was a pullback in Facebook, Apple, Amazon, Netflix and Google-Parent Alphabet.

President Donald Trump, who wanted major changes to the NAFTA, has already wrapped up a deal with Mexico and is due to publish the text on Friday. He has threatened to leave out Canada unless it signs up by Sunday.

At 9:53 a.m. EDT the Dow Jones Industrial Average was down 27.78 points, or 0.11 percent, at 26,412.15, the S&P 500 was down 4.09 points, or 0.14 percent, at 2,909.91 and the Nasdaq Composite was down 21.18 points, or 0.26 percent, at 8,020.79.

So far, the S&P 500 and the Dow have risen 7.2 percent and 8.9 percent, respectively, in the quarter and were on track for their best third-quarter performance since 2010.

Eight of the 11 major S&P sectors were in the red, with the financials weighing the most with a 0.76 percent drop.

Defensive sectors utilities, real estate and consumer staples, were the only ones to eke out gains.

Tesla tumbled 11.3 percent after the U.S. Securities and Exchange Commission accused Chief Executive Elon Musk of fraud and sought to remove him from his role. Musk responded by saying the SEC action was "unjustified".

Nvidia gained 3.4 percent, the most on the S&P 500, after Evercore ISI hiked PT, citing increasing value as a platform company.

In a bright spot, data showed U.S. consumer spending increased steadily in August, supporting expectations of solid economic growth in the third quarter, while core PCE price index remained at two percent.

Advancing issues outnumbered decliners by a 1.12-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.27-to-1 ratio on the Nasdaq.

The S&P index recorded 14 new 52-week highs and 12 new lows, while the Nasdaq recorded 30 new highs and 37 new lows.

(Reporting by Amy Caren Daniel in Bengaluru; Editing by Arun Koyyur)