Stocks tumble as worries about Europe return
NEW YORK — Stocks tumbled for a second day today after concerns grew that the deep spending cuts under Europe’s bailout plan would slow a global recovery.
The Dow Jones industrial average ended down 163 points but closed well off its lows of the day. The Dow and other major stock indexes still posted big gains for the week after rocketing higher Monday on hopes that a bailout plan for Europe would prevent a debt crisis in Greece from spreading.
The latest drop followed a slide of more than 3 percent in European markets. The euro dropped to a 19-month low against the dollar.
Investors seeking safety piled into Treasurys and the dollar. Gold settled lower after hitting another record. Crude oil sank nearly 4 percent, and an indicator of stock market volatility jumped.
Currency traders have been moving out of the euro throughout the week because of concerns that cost-cutting measures in countries like Greece, Spain and Portugal would slow economic activity on the continent and elsewhere. Now stock investors are also looking at those same problems.
Shifting sentiment about the problems in Europe whipsawed the market during the week. Major indexes posted their biggest gains in more than a year on Monday after a nearly $1 trillion rescue package from the European Union and International Monetary Fund raised hopes that debt-strapped EU countries wouldn’t be a drag on a global rebound.
But the glow from the bailout package faded during the week, pushing the euro down sharply against the dollar. The spike in the dollar hit the prices for oil and other commodities, hurting major U.S. energy and materials companies.
“Clearly the action in the euro is reflecting the fact that at least currency investors don’t think the bailout plan plus the austerity measures are sufficient,” said Uri Landesman, president of Platinum Partners in New York. “The euro is leading the market down.”
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