Stocks plummet again on European fears

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

U.S. stocks plummeted anew on Wednesday as fresh concerns about the European debt crisis and the dimming prospects for the global economy overwhelmed the brief euphoria that had carried stocks higher a day earlier.

In another dramatically volatile session, the Dow Jones industrial average sank 519.83 points, or 4.6%, to 10,719.94.

Though the market was down all day, the selling intensified in the final two hours, and the Dow closed at its low of the day, an ominous sign that reflected traders’ unwillingness to hold stocks overnight.

A day after stocks were buoyed by the Federal Reserve’s vow to keep interest rates low for at least two more years, investors grew nervous about the financial wherewithal of European banks and the outlook for the sovereign debt of Italy and Spain.

The Dow, which had surged 429 points, or 4%, on Tuesday, sank at the outset on Wednesday and remained deeply in the red the entire session.

‘You’re seeing people taking profits quickly in this environment,’ said Ryan Larson, head trader at RBC Global Asset Management in Chicago. ‘You’ve got to take what you’re going to get fast, because otherwise you’ll miss it.’

The Standard & Poor’s 500 index slumped 51.77 points, or 4.4%, to 1,120.76. The Nasdaq composite index slid 101.47 points, or 4.1%, to 2,381.05.

Europe’s worsening debt crisis hammered financial stocks in France, Germany and Italy, taking the heaviest toll on French banks on rumors that France might lose its AAA credit rating.

‘Markets are testing different possibilities, and one of them now is France,’’ said Kai Carstensen, economics analyst at the Institute for Economic Research in Munich, Germany. ‘The French deficit is still too high. Their consolidation plans and austerity measures are not perceived as sufficient, and people don’t believe France will adhere to its own rules.’

Although all three major ratings firms affirmed France’s AAA rating, the French stock market dived 5.4%. German shares slumped 5.1% and the Italian market plummeted 6.6%.

Analysts said investors also were spooked by the Federal Reserve’s grim reassessment on Tuesday of the U.S. economy’s growth prospects. The Fed said it was likely to keep short-term interest rates near zero through mid-2013, but that intensified some investors’ doubts about the economy’s prospects.

Investors continued to pour into U.S. Treasury bonds for safety, and to lock in yields. The five-year T-note yield slid to 0.91% from 1.00% on Tuesday.

Money also piled into gold again. Gold futures in New York jumped $41.30 to a record $1,781.30 an ounce.

-- Walter Hamilton, Tom Petruno and Edmund Sanders

RELATED:

Treasury sells 10-year notes at record low yield as buyers pour in

European concerns drive stock market lower

Dow falls 400 points in early trading