Turmoil in Europe pushes stocks lower in US
Tuesday, May 8, 2012
Political uncertainty in debt-hobbled Europe spread to financial markets Tuesday and pushed stocks lower in Europe and the United States.
The Dow Jones industrial average was down almost 200 points at its low point for the day before recovering most of its loss to finish down 76. It was the average’s fifth straight decline.
European indexes closed near their lowest levels in months, and the euro neared a five-month low against the dollar.
Prices plummeted for commodities like oil and copper that depend on the health of the world economy. The turmoil in Europe added to concerns about slower economic growth in China and weaker job creation in the U.S.
Trading throughout the markets is growing more volatile as Europe’s debt crisis “accelerates to a point where it’s not really controllable with the sorts of Band-Aids they’ve used,” said Daniel Alpert, managing partner at the investment bank Westwood Capital Partners LLC.
In Greece on Tuesday, the left-wing politician struggling to form a new government declared that the country was no longer bound by its promises cut spending sharply in exchange for international bailout loans.
After a calm finish Monday, benchmark indexes in Germany and France plunged to near their lowest levels this year. Italy’s was near its lowest since last November. The main stock index in Britain hit its lowest point this year.
Central banks have injected billions into Europe’s financial system, providing temporary support for stock and commodity prices, Alpert said. “If that liquidity is supposed to prime the pump, and the pump doesn’t take over, then you’ve got a problem,” he said.
In the U.S., traders dumped risky assets and commodities, partly because of concern that a punishing recession in Europe would hurt demand for U.S. exports. The price of oil continued its week-long slide. Copper and silver each lost more than 2 percent.
Money flowed into safe investments such as U.S. Treasurys, pushing the yield on the 10-year Treasury note down to 1.85 percent from 1.88 percent late Monday.
A flurry of late-day buying helped the indexes recover from their earlier lows. The Dow closed down 76.44 points, or 0.6 percent, at 12,932.09. The Standard & Poor’s 500 index fell 5.86, or 0.4 percent, to 1,363.72. The Nasdaq composite index fell 11.49, or 0.4 percent, to 2,946.27.