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US stocks fall as Europe doubts bubble to surface

Associated Press Modified: May 9, 2012 at 3:45 pm •  Published: May 9, 2012

Fear of European debt is once again playing havoc with Wall Street.

Stocks pitched down Wednesday in the United States as borrowing rates climbed for Spain and Italy, a sign that investors are losing confidence in those countries' finances.

Spain's 10-year borrowing rate leapt to 6.06 percent from 5.70 percent early Tuesday. Many fear that Spain, strangled by high unemployment and a real estate collapse, could be the next nation to require financial rescue.

The Dow Jones industrial average was down as much as 184 points before recovering about half of the loss. Still, the average has fallen for six consecutive days, its longest losing streak since last summer.

The Dow soared 2,624 points, or 25 percent, from Oct. 3 through May 1 as European leaders appeared to get a handle on the debt crisis. Last fall, nations that use the euro agreed to enforce budget discipline across the region.

Since May 1, when the Dow closed at a four-year high, worries about Europe have resurfaced. In elections on Sunday, Greek and French voters ousted leaders who had imposed tough spending cuts to soothe investors.

In the six losing days that ended Wednesday, the Dow gave back 444 points — one-sixth of the points it gained during its eight-month rally. The Dow closed down 97.03 points, or 0.8 percent, at 12,835.06.

Greece, without a government since Sunday's elections, appears increasingly likely to exit the euro currency union or be forced out. The resulting uncertainty could cause turmoil throughout global markets.

The spring decline has become a motif on Wall Street. In 2010 and 2011, the Dow climbed in the first three months of the year, then flat-lined or lost ground as events overseas overshadowed modest economic growth in the U.S.

The market today is tame compared with last summer, when the Dow routinely swung by hundreds of points a day.

But the atmosphere is starting to resemble last year's as traders sell anything deemed risky based on the latest headlines from Europe, said Peter Tchir, who trades a range of investments for his hedge fund TF Market Advisors.

"The concern in Spain is at such a high level that people trade the indexes or big futures contracts and are less discriminating about what risk they're taking on," he said.

On Wednesday, prices fell for commodities such as energy, copper and silver that are needed to sustain broad economic growth but are less valuable when the economy is weaker and demand wanes.

Benchmark crude oil, which sold for about $110 per barrel earlier this year, fell below $100 last week and kept sliding. It closed below $97 Wednesday on the New York Mercantile Exchange, continuing its longest decline since last July.

Commodity prices also were under pressure because the dollar rose against the euro, sending the euro down as low as $1.2910, its lowest point since Jan. 23. Commodities are traded in dollars, so a strong dollar makes them appear more expensive to investors who hold foreign currencies.

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