NEW YORK (AP) — Stocks and the euro fell Wednesday as worries about Europe hang over financial markets. Energy companies fell hard as the price of crude oil plunged 4 percent. The dollar and Treasury prices rose as traders shifted money into lower-risk investments.
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 euro3 billion ($3.95 billion) for five years, up from 6.30 percent just a month ago. The higher rates make it more expensive for Italy to borrow money and reflect weakening confidence by investors in the country’s ability to repay its debts.
The Dow Jones industrial average fell 132 points, or 1.1 percent, to 11,822 as of noon Eastern. Caterpillar Inc. fell 5 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 15, or 1.2 percent, to 1,210. The Nasdaq fell 49 points, or 1.9 percent to 2,529.
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 against other currencies. The euro lost about out penny against the dollar to $1.29.
European markets fell broadly, and the losses accelerated in the last hour of trading. Germany’s DAX dropped 1.7 percent; France’s main stock index fell 3.3 percent.
Energy stocks led the market lower after the price of crude oil plunged $4 to $96 a barrel. Schlumberger Ltd. lost 3.8 percent; Apache Corp. fell 4.3 percent and Cabot Oil & Gas Corp. fell 5.4 percent.
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.
Health care, utilities and consumer staples companies – all considered relatively resistant to economic downturns – were little changed. Technology, materials and industrial companies fell the most.
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 3 percent for the week, while S&P has lost 3 percent. The Nasdaq is down 4 percent.
