Wednesday, March 27, 2013

Stocks slide, following European markets lower

NEW YORK (AP) ? Worries about Europe rattled the stock market Wednesday, a day after the Dow Jones industrial average had its biggest gain in three weeks.

Investors are watching to see if Cyprus can restore confidence in its banking system. They are also keeping an eye on Italy, where political parties are struggling to form a new government.

The Dow Jones industrial average was down 63 points, or 0.4 percent, at 14,494 an hour after the opening bell Wednesday. The decline erased the Dow's gain for the week. The index had rallied 111 points Tuesday on better U.S. housing news.

Cyprus is working out details for how to reopen its banks after a nearly two-week shutdown. An international bailout agreement calls for large deposits to be used to help pay for the rescue of its banking system.

In Italy, center-left leader Pier Luigi Bersani failed to get support from the anti-establishment 5 Star Movement to form a new government. Political gridlock in Italy has been a major concern for investors following inconclusive results of elections in late February. Investors worry that the country won't follow through with unpopular budget cuts, potentially undermining confidence in the euro.

European markets fell. Benchmark indexes were down 1.2 percent in Germany and 1.4 percent in France. Italy's main stock index slumped 1.2 percent.

The worries hit Europe's bond markets especially hard. Borrowing rates for Italy and Spain shot higher, which means investors' confidence in the financial stability of those countries is weakening. Rates for more stable European countries like Germany and France fell as investors bought their bonds.

In the market for U.S. government bonds, the yield on the 10-year Treasury note dropped to 1.85 percent. That's a sharp fall from 1.91 percent late Tuesday and suggests investors are moving money into ultra-safe assets.

The Standard & Poor's 500 index was down seven points, or 0.5 percent, to 1,556. The Nasdaq composite was down 18 points, 0.6 percent, at 3,234.

The declines were broad. All 10 industry groups in the S&P 500 index fell, led by banks and industrial companies. The groups with the smallest losses were utilities and health care, which investors tend to buy when they're feeling risk-averse.

The S&P 500 closed within two points of its all-time high of 1,565 on Tuesday, helped by rising home prices and orders for manufactured goods. The stock index hit that peak on Oct. 9, 2007, before the Great Recession and a financial crisis roiled financial markets.

Cliffs Natural Resources, an iron ore mining company, plunged 13 percent, the biggest loss in the S&P. The stock fell $2.78 to $18.65.

Science Applications International Corp. jumped 4 percent after the security and communications technology provider reported a fourth-quarter profit that was better than analysts were expecting. SAIC also announced a special dividend of $1 per share. The stock rose 65 cents to $13.47.


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