McGraw-Hill stock has worst day since Black Monday

NEW YORK (MarketWatch) � McGraw-Hill Cos. and Moody�s Corp. stocks tumbled more than 10% Monday after Standard & Poor�s Rating Services, owned by McGraw-Hill, disclosed the Justice Department plans to file a civil lawsuit for its role in the financial crisis.

McGraw-Hill MHP �and Moody�s MCO �were the two worst performers in the S&P 500 SPX , with McGraw-Hill stock seeing the worst one day performance since stocks crashed in October 1987 in what�s known as Black Monday.

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The Dow Jones Industrial Average slumped toward its first triple-digit drop this year, as weakness in technology stocks helped derail a five-week rally for the blue chips. WSJ's Jonathan Cheng reports on The News Hub. Photo: Bloomberg.

The civil charges will be focused on ratings in 2007 of certain U.S. collateralized debt obligations. S&P is denying any wrongdoing. The firm said in a statement the DOJ lawsuit is entirely without factual or legal merit. Read S&P's press statement.

The ratings agency said in the statement that the same data was reviewed by another rating agency and government officials, all of which stated the subprime market appeared to be contained in 2007.

S&P said it deeply regrets that the CDO ratings failed to fully anticipate the rapidly deteriorating conditions in the U.S. mortgage market during that volatile time.

Rival agencies Moody�s Corp. and Fitch Ratings weren't targeted by the Department of Justice, according to a Wall Street Journal report. The Department of Justice had no comment on the matter. Read the WSJ's report on the planned mortgage-bond charges.

A Fitch spokesman said via email that �we have no reason to believe Fitch is a target of any such action.�

Wall Street firms packaged mortgages and turned them into complex financial investments called CDOs in the years leading up to the financial crisis. The banks then sold these CDOs to investors and collected originations fees.

Financial stocks were broadly under pressure on Monday as Europe debt fears resurfaced. Bank of America BAC , Goldman Sachs GS �and Citigroup Inc. C �fell more than 1%. Morgan Stanley MS �was down 2.7%, although the stock is up 20% this year. J.P. Morgan Chase & Co. JPM �fell 0.4%.

The Financial Select Spector index XLF , which tracks financial stocks in the S&P 500, fell 1.1%.

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The political corruption scandal sweeping Spain is pushing borrowing costs higher. WSJ's David Roman explains why there are fears the country's austerity program will stall. Photo: Getty.

Spanish Prime Minister Mariano Rajoy is facing accusations of corruption and is being called to resign by the opposition over allegations of receiving cash payments from companies looking to compete for contracts, according to reports. Read: Spain yields rise as Rajoy aims to contain scandal

In Italy, former Prime Minister Silvio Berlusconi is gaining popularity in the latest polls before the election. If Berlusconi were to regain power, it could threaten the country�s reforms. Read: Italy, Spain jitters spook Europe markets.

The U.K. Banking Reform bill published on Monday will give the Treasury and bank regulator authority to break up any bank that doesn�t separate retail banking and riskier businesses within the firm.

The �electrified� ring fence approach was recommended in December by a cross-party parliamentary banking commission and endorsed by the Parliamentary Committee on Banking Standards. The reform was broadly supported by close to 100 MP�s giving the committee support for tougher bank rules, a report in the Financial Times said.

The British Bankers� Association doesn't approve of this new rule, saying the reform would create uncertainty for investors and will make it harder for banks to raise capital, leaving less money to lend to business, the paper�s report said.

Credit Suisse analysts have said the U.K. banks most in trouble are Barclays BCS �and possible RBS RBS , according to the Financial Times.

UBS is getting ready to send a letter to its bond-buying clients telling them they have been reclassified as �aggressive� investors following a recent change in the company�s market outlook, according to a report by Fox Business Network. The change reflects increasing bearishness about the bond market, the report said.