Euro concerns sink stocks
Unable to hold early morning gains, Dow falls for eighth time in 10 days
NEW YORK – A drop in the euro set off a late-day slide in stocks Wednesday and sent the Dow Jones industrial average to its first close below 10,000 in nearly four months.
The Dow, up 135 points in morning trading, ended down about 69. It was the eighth drop for the Dow in 10 days. Wednesday’s trading extended a streak of volatility since stocks went to their highest level of the year in late April.
The late reversal underscored how jittery traders are about Europe. They are worried that heavy debt loads in European countries and more rounds of cost-cutting will hamper a recovery there, which could spread quickly to other regions.
“We had a nice rally all day and we expected it to have had legs,” said Phillip Orlando, chief equity market strategist at Federated investors in New York, which manages about $400 billion. The sudden sell-off, he said, suggests “that investors are as nervous as a long-tailed cat in a roomful of rocking chairs.”
The euro fell in late trading, pulling major stock indexes lower, following a Financial Times report that China is reviewing its holdings of European government bonds because of the crisis in government debt there.
China has been seeking ways to diversify its massive foreign exchange holdings out of dollars for some time. However any indication that it was losing confidence in the euro, leading it to sell some portion of its European bond holdings, would deliver a major blow to the European currency.
The sliding euro has become a symbol of waning confidence in Europe’s ability to contain its debt problems. The euro remains close to the four-year low it hit last week. It fell to $1.2179 Wednesday.
“The inability of the market to hang on to the early gains today certainly does not send a very positive message,” said Teddy Weisberg, a New York Stock Exchange floor trader with Seaport Securities. “It’s a function of there being no confidence among investors.”
The Dow fell 69.30, or 0.7 percent, to 9,974.45. It was the first close below 10,000 since Feb. 8 when the Dow finished at 9,908.
The broader Standard & Poor’s 500 index fell 6.08, or 0.6 percent, to 1,067.95. The Nasdaq composite index closed down 15.07, or 0.7 percent, to 2,195.88.
The slide in stocks has rattled investors still shaken by the market’s plunge in late 2008 and early 2009.
“Everyone is so scared from what happened back in the big crash and now they’re just all gun-shy,” said Frank Ingarra, co-portfolio manager at Hennessy Funds.