A rising tide of political uncertainty in Europe pushed U.S. stocks sharply lower Tuesday.
Major indexes followed European markets down as newly-elected Greek politicians appeared unable to form a coalition government. The Dow Jones industrial average fell 169 points in morning trading.
Greece’s debate over austerity policies attached to its international bailouts turned combative, with one leading politician calling on others to reverse their support for the multibillion-euro package.
“There is no way we will sneak back in again what the Greek people threw out” in the election, said Alexis Tsipras, head of a Radical Left group that is trying to form a governing majority by joining with other parties. The conservative party that got the most votes already said it was unable to form a government.
Greek voters on Sunday rejected parties that helped impose deep spending cuts demanded by lenders including the International Monetary Fund. The cuts to pensions and social programs are deepening Greece’s crushing recession. Without economic growth, voters fear Greece will be unable to repay the bailouts.
Greek voters made that point by electing a slew of splinter parties to parliament, challenging their leaders’ ability to form a majority coalition that can govern effectively.
As another round of elections in Greece appeared more likely, uncertainty gripped European markets. Greek stocks plunged nearly 4 percent. Losses on other exchanges in the region were more modest, though major indexes in France and the U.K. lost more than 2 percent. The euro fell below $1.30, near a five-month low reached as Sunday’s election results were announced.
The Dow Jones industrial average fell 159 points to 12,849 as of 11 a.m. EDT. Only two of the 30 stocks in the Dow rose. Seventeen of the 30 fell by a percentage point or more. If the Dow closes lower, it will be the index’s fifth straight session of losses.
The Standard & Poor’s 500 index dropped 18 points to 1,351. The Nasdaq composite average lost 47 to 2,910.
Oil continued its week-long slide, falling 1.5 percent on the New York Mercantile Exchange.
European financial markets have been buffeted for three years by shifting perceptions about the gravity of region’s the debt crisis. At times, many feared a messy string of defaults that could set off a global credit crunch. Yet opponents of strict austerity say Europe will be unable to emerge from its recession unless governments spend more to boost demand in the economy.
French voters on Sunday elected a new president who has spoken out against austerity and promised to cut France’s debt load more slowly. Stocks in France fell sharply as many wondered if the new Socialist leader can balance the two priorities without upsetting bond investors or voters.
Stocks recovered from early losses on Monday as traders’ knee-jerk reactions to the news from Europe faded away. That sense of relief had evaporated by early Tuesday as traders focused on the disarray in Greece.