Financial stocks including American Express, J.P. Morgan Chase and Bank of America led U.S. stocks lower Tuesday as the market cooled off from last week's rally while worries over the health of European banks recirculated. The Dow Jones Industrial Average dropped 107.24 points, or 1.03%, to 10340.69, snapping a four day winning streak.

American Express was the measure's worst performer with a drop of 1.71, or 4.1%, to 40.09. J.P. Morgan was also weak with a decline of 89 cents, or 2.3%, to 38.28, and Bank of America slipped 29 cents, or 2.2%, to 13.21. The Nasdaq Composite fell 24.86, or 1.11%, to 2208.89.

The Standard & Poor's 500 index shed 12.67, or 1.15%, to 1091.84. All of the measure's sectors fell, with financials posting the biggest percentage drop.

The decline came as skepticism grew over last week's rally, when the Dow had its best pre-Labor Day week in two decades. Meanwhile, questions emerged over the stress tests of European banks, prompting concerns over their health.

European market

European stock markets snapped their recent winning streak to close lower Tuesday, weighed down by losses in the banking and commodities sectors. The Stoxx Europe 600 Index shed 0.5% to 259.76 points. In the U.K., the FTSE 100 index closed down 0.6% to 5,407.82, while the French CAC 40 index fell 1.1% to 3,643.81. The German DAX 30 index dipped 0.6% to 6,117.89.

Banks were among the biggest losers in Europe as regulators met in Basel to finalize new global rules on capital requirements and after The Wall Street Journal reported that the region's recent stress tests underestimated some lenders' holdings of government debt.

Germany's Die Zeit reported late Monday that banks could be required to hold a Tier 1 capital level of 9% under new rules dubbed Basel III, potentially rising to 12% in boom years in order to build reserves to pay for a downturn.

Earlier Monday, the Federal Association of German Banks had estimated that the country's 10 largest lenders could need as much as EUR105 billion of extra capital under planned Basel rules.

Separately the Journal report named Credit Agricole and Barclays as among the banks that excluded some sovereign holdings from their calculations, though it added it is impossible to gauge the number of banks or the overall effect of the practice. All the banks reportedly said they correctly followed the disclosure guidelines of regulators.

Shares in Credit Agricole fell 2.8%. French banks have some of the highest exposures to risky European countries such as Greece and other domestic lenders also fell sharply. BNP Paribas dropped 2.2% and Societe Generale fell 3.9%.

Barclays declined 2.7% in London after it also announced that Robert Diamond, the head of its investment banking arm, will take over as chief executive of the entire group next year.

Asian market

Asian stock markets ended mixed Tuesday as exporters helped Japanese shares snap a four day rally on renewed worries about the yen's strength, while steel makers climbed around the region on expectations for higher Chinese steel prices.

Japan's Nikkei Share Average dropped 0.8%, South Korea's Kospi lost 0.3%, China's Shanghai Composite Index inched up 0.1%, and Hong Kong's Hang Seng Index added 0.2%.

Trading volumes were modest in some markets in the absence of overnight cues from the U.S., where markets were shut Monday for the Labor Day holiday.

Japanese exporters declined as the yen rose against major currencies, although the Bank of Japan held its policy interest rate unchanged and left open the possibility of additional emergency action to support the economy. Advantest Corp. fell 1.8%, Elpida Memory Inc. gave up 3.0% and Honda Motor was down 1.4%.

Commodities and metals

Base metals closed mostly lower on the London Metal Exchange Tuesday after renewed economic concerns drove investors into the dollar.

The euro had fallen 1.2% against the U.S. currency, to $1.2720, on the back of a Wall Street Journal report that cast doubt over the reliability of European bank stress test results.

LME three month copper traded down 1% on the day, while aluminum tumbled 1.3%. Tin and nickel, however, managed to buck the trend and close higher.

Crude futures settled lower Tuesday, as concerns about the health of the global economy weighed on crude even as a refinery explosion in Mexico pushed oil products higher.

Light, sweet crude for October delivery settled down 51 cents, or 0.7%, at $74.09 a barrel on the New York Mercantile Exchange, after falling as low as $72.63 earlier in the session. Brent crude on the ICE futures exchange settled up 87 cents at $77.74 a barrel.

Oil prices ventured lower early in the session as equities markets fell and the dollar rose against the euro.

A Wall Street Journal analysis of the recent stress tests on Europe's banks showed the test understated some lenders' holding of potentially risky government debt, re-igniting fears about the global economy and sending investors fleeing risky assets.

But crude losses narrowed later in the day after Mexico's government owned oil company Petroleos Mexicanos, or Pemex, confirmed that an explosion occurred Tuesday at its Cadereyta refinery near the U.S. border.

Gold futures finished at a record settlement, driven by similar factors worries over Europe's banking system and the global recovery--that brought the yellow metal to all time highs in June.

Nearby gold, for September delivery, ended $8.10 higher at $1,257.30 an ounce, besting its record settlement by a dime.

The most actively traded contract, for December delivery, rose by $8.20, or 0.7%, to settle at $1,259.30 an ounce on the Comex division of the new York Mercantile Exchange.