Fear about Europe’s financial stability caused traders to retreat from most investments seen as risky today, punishing U.S. stocks and pushing the yield on the benchmark 10-year Treasury note to a record low.
Major U.S. stock indexes fell more than a percentage point in the first half-hour of trading. Traders dumped European stocks and government bonds and the euro fell to a nearly two-year low against the dollar. Borrowing rates for European governments rose sharply, even for relatively stable nations such as France.
Rising demand for low-risk, easily tradable securities pushed the yield on the 10-year Treasury note to 1.64 percent, the lowest on record, from 1.74 percent late Tuesday. German government bond yields also plunged.
The Dow Jones industrial average plunged 131 points to 12,449. The Dow has had a miserable May. It’s down 5.9 percent for the month, putting it on track for its first losing month since September.
Concerns about Europe seemed to lurk around every corner: Europe’s executive body said consumer confidence fell sharply last month. Spaniards withdrew money from their banks, spreading fear about that nation’s ability to go on without bailouts. Spain’s main stock index fell two percent.
If Europe’s financial crisis plunges it into a deep recession, global economic growth will likely falter, reducing demand for commodities and machines that power growth. Fearing that outcome, traders pushed heavy equipment maker Caterpillar and aluminum company Alcoa to the biggest declines among the 30 companies that make up the Dow.
In other U.S. trading, the Standard & Poor’s 500 index lost 15 to 1,317. The Nasdaq composite average slid 35 to 2,835.
Metals, food and energy commodities all fell sharply. Crude oil lost more than $2 to $88 a barrel, a large move. Crude has been falling steadily since the beginning of May, when it traded as high as $106 a barrel.
The euro fell as low as $1.2405, the lowest since the summer of 2010.
Spain’s borrowing costs soared to the highest level since the country joined the euro. Traders are worried that the country won’t be able to navigate a real estate crash that has hobbled one of its biggest lenders, Bankia.
The yield on Spain’s 10-year bonds, a key indicator of market confidence in a country’s ability to pay down its debt, shot as high as 6.67 percent, matching the level it hit at the height of the euro crisis late last year.
Agricultural company Monsanto was one of the few big gainers in a sea of red. The stock jumped 3 percent after the company’s CEO told investors that earnings will likely surge 25 percent this year, far more than Wall Street had been expecting. Sales were strong in its seed and chemicals business, including Roundup herbicides.
Blackberry maker Research in Motion plunged 10 percent to $10 after the company said late Tuesday it had hired a team of bankers to help it weigh its options — Wall Street jargon for a possible sale or reorganization. RIM’s business has been crumbling as smartphone users move to iPhone and Android devices.