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Turmoil in Europe pushes stocks lower in US

Associated Press Modified: May 8, 2012 at 5:15 pm •  Published: May 8, 2012
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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.

Greek voters on Sunday rejected parties that had imposed the deep spending cuts demanded by Greece's bailout lenders. Cuts to pensions and social programs are deepening Greece's crushing recession.

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.

The politician, Alexis Tsipras, also demanded a moratorium on repaying the part of Greece's debt that is "onerous." The main stock index in Greece closed down 3.6 percent after a 7 percent decline the day before.

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 economic demand. The price of oil continued its week-long slide. Copper and silver each lost more than 2 percent.

Gold fell $34.60 to a four-month low of $1,604.50. It dipped below $1,600 for the first time since early January. Gold often serves as a safe, stable investment to hold in turbulent times. But in periods of rapid selling, investors sometimes sell gold as a ready source of cash.

The stronger dollar contributed to the fall in commodity prices. Commodities are priced in dollars, so a stronger dollar makes them appear more expensive to traders who use other currencies.

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.

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