Stocks slide lower as euro worries persist

By Associated Press

NEW YORK ? Stocks and the euro fell early Wednesday as worries over Europe hang over financial markets. Energy companies fell hard as the price of crude oil plunged 4 percent.

Italy's borrowing rates ratcheted higher and the euro slid below $1.30 for the first time since January, two signs that the debt crisis continues to pressure Europe's governments. The euro has lost more than 3 percent in three days.

Italy had to pay higher borrowing rates in its last bond auction of the year Wednesday. The euro zone's third-largest economy paid 6.47 percent interest to borrow?3.95 billion for five years, up from 6.30 percent just a month ago. That's a sign that investors' confidence in Italy's ability to pay its debts is waning.

The Dow Jones industrial average fell 106 points, or 1 percent to 11,849 in early-morning trading. Caterpillar Inc. fell 3.4 percent, the most of the 30 stocks in the Dow. The Dow is headed for its third down day in a row. It closed at its lowest level in two weeks Tuesday.

The market appears to be in "sell now and ask questions later mode," said John Canally, investment strategist at LPL Financial. The fear that another bank failure will lead to a wider financial crisis like Lehman Brothers did in 2008 overshadows everything else, he said.

In traders' minds, a slight drop in the euro or a small rise in Italian government bond yields is seen as a step toward a banking collapse. "Just the hint of bad news becomes 'Oh my gosh. The world is going to end,' " Canally said.

The Standard & Poor's 500 index fell 12, or 1 percent, to 1,214. The Nasdaq fell 38 points, or 1.5 percent to 2,541.

The yield on the 10-year Treasury note fell to 1.92 percent from 1.96 percent late Tuesday as demand increased for ultrasafe assets. The dollar also rose sharply against other currencies. The euro lost about out penny against the dollar to $1.29.

In Europe, Germany's DAX dropped 1.6 percent; France's main stock index fell 3 percent.

The steep drop in crude prices pulled down Cabot Oil & Gas Corp, Alpha Natural Resources Inc. and Apache Corp. All three were down more than 3 percent in early trading. The price of crude oil sank $4 to $96 in morning trading.

Other commodities prices also fell sharply as investors shed assets seen as being risky. Commodity prices also tend to fall when the dollar rises, since a stronger dollar makes it more expensive for investors using other currencies to buy commodities, which are priced in dollars. Gold and copper lost each 5 percent.

First Solar Inc. plunged 21 percent, the biggest drop in the S&P 500, after the country's largest solar company slashed its earnings estimate for the year. The solar industry has been hit hard by slower economic growth around the world and as government funding for alternative energy projects has dried up.

Avon jumped 8 percent, the largest gain in the S&P 500. The company announced late Tuesday that its CEO, Andrea Jung, will step down. The cosmetics company has been struggling with erratic financial results and is under scrutiny by regulators.

The Dow is now down 2.8 percent for the week, while S&P has lost 3.3 percent. The Nasdaq is down 4 percent.

The markets have already told is that Europe currently has a broken monetary system, according to Kyle Bass, Hayman Capital Management managing partner.

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Source: http://bottomline.msnbc.msn.com/_news/2011/12/14/9443632-stocks-slide-lower-as-euro-worries-persist

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