DJIA Drops 160 Pts On Euro Zone Woes

[Stocks-to-Watch]

Normally, encouraging news about jobless claims and the state of the U.S housing market will send stock prices higher. Not today.

Major U.S. stock indexes were down sharply, with the Dow Jones Industrial Average losing*1.3% as a batch of bad headlines out of Europe consumed investors’ attention and investors fled risky assets.

The Dow Jones Industrial Average shed 160 points in early afternoon trading, falling to 11,745, while the Standard & Poor’s 500-stock index fell almost 20 points, or 1.7% to 1216. The Nasdaq Composite lost 52 points, or 2%, falling to 2,587.

Declines in commodity prices*accelerated as well, with U.S. crude futures sliding below $100 a barrel.

Investors are worried that Europe’s debt problems could knock the global economy into another recession, which would hurt U.S. growth, edspite*economic data here suggesting that the economy is picking up.

U.S. Labor Department data released before the opening bell showed that the number of people applying for new unemployment benefits last week fell to the lowest level since early April. And new housing starts fell less than expected.

But Spain sold 10-year bonds at an average yield of 6.975%, a euro-era record and a source of concern since the 7% mark is viewed by investors as unsustainable. French bonds also fell, putting upward pressure on yields.

On Wednesday, the Dow dropped 191 points on Wednesday as Fitch Ratings warned the credit outlook for U.S. banks could worsen unless the euro zone’s debt crisis is resolved in a “timely and orderly” manner.

Shares of Citigroup (C), Morgan Stanley (MS), Wells Fargo (WFC) and other big U.S. banks were down in mid-session trading.

Sectors viewed as defensive such as utilities and consumer staples stocks managed slim gains, while other sectors fell, including technology. The Amex Computer Technology Index fell 2.6% to 971.54.



Original Article Source by Barrons.com