Stocks wrap up May on sour note

NEW YORK – Stocks closed out their worst month in more than a year by sliding again on more unsettling news about Europe.

The Dow Jones industrials dropped 122 points Friday after Fitch Ratings gave Spain the second downgrade of its credit rating in a month. The rating agency’s action was another reminder to traders of the long-term economic problems still facing several European countries, and perhaps the rest of the continent and the global economy as well.

May was difficult as persistent and intensifying worries about Europe’s debt problems sent the Dow down 7.9 percent and the broader Standard & Poor’s 500 index down 8.2 percent. Both indexes had their worst monthly performance since February 2009, the month before stocks began their recovery from 12-year lows. The Dow lost nearly 872 points, its biggest point drop ever for May.

The last trading day of May fit the pattern of the rest of the month. Stocks alternately plunged and recovered, then dropped late in the day as investors facing a three-day holiday weekend decided to play it safe and sell.

Stocks were already down before the news about Spain broke in the early afternoon.

The market’s reaction was an example of how quick investors have been to sell during May. Although the day didn’t see the huge swings stocks had earlier this month, there was still plenty of emotion. The biggest shock of the month came May 6, when the Dow took a dive of 1,000 points in less than 30 minutes before recovering most of its losses.

The market’s drop this month has given it what’s called a “correction.” That’s considered a drop of 10 percent or more from a recent high. The S&P 500, the index most watched by market pros, ended May down 10.5 percent from its high for the year, reached April 23. The Dow is down 9.5 percent from its 2010 high, reached April 26. The Dow has regained some ground from the low of 9,974.45 it closed at on Wednesday.