Stocks fall as European bank dashes hopes
Specialist Bradley Kessler, left, and trader Gordon Charlop work on the floor of the New York Stock Exchange. Markets were subdued Thursday, Dec. 8, 2011, in the run-up to a crucial summit of European Union leaders that could determine whether the euro currency survives. (Dec. 5, 2011) Credit: AP
Financial markets slumped Thursday after the head of the European Central Bank dashed hopes the bank was preparing to help extinguish the region's debt crisis.
The Dow Jones industrial average dropped nearly 200 points as investors around the world reacted to every word spoken and rumor spread at a European Union summit.
The markets could be headed for another wild ride today as European officials try to strike a deal to mandate greater oversight of government budgets.
"People are very nervous that Europe will yet again fail to adequately address the sovereign debt crisis," said David Kelly, chief market strategist for JP Morgan Funds.
Investors overlooked good news on the U.S. economy Thursday, Kelly said. Claims for unemployment benefits dropped, and wholesale companies increased their inventories in expectation of stronger sales.
Stocks in the United States fell early Thursday after Mario Draghi, president of the ECB, said there was no plan for large-scale purchases of European government bonds, as many in the markets expected.
His remarks sent borrowing costs soaring for Italy, Spain and other countries with heavy debt burdens. European stock indexes fell, and the euro weakened against the dollar. Draghi made his comments after the central bank cut its benchmark interest rate to 1 percent and took other steps to help shore up Europe's financial system.
Bank stocks led the way lower in the United States. Citigroup Inc. plunged 7 percent; Morgan Stanley 8.4 percent. JPMorgan Chase & Co. slid 5.2 percent, the most of the 30 large companies in the Dow average.
The Dow fell 198.67 points, or 1.63 percent, to 11,997.70. The drop ended a three-day run of modest gains. The last time the Dow closed below 12,000 was Nov. 29.
The Standard & Poor's 500 index fell 26.66, or 2.11 percent, to 1,234.35. The Nasdaq lost 52.83, or 1.99 percent, to 2,596.38.
The European debt crisis could still get worse and eventually force the United States and other countries to step in, said Ihab Salib, a global bond fund manager at Federated Investors. But the euro is unlikely to collapse because too much is at stake.
Out East: Mecox Bay Dairy, Kent Animal Shelter, Custer Institute & Observatory and local champagnes NewsdayTV's Doug Geed takes us "Out East," and shows us different spots you can visit this winter.
Out East: Mecox Bay Dairy, Kent Animal Shelter, Custer Institute & Observatory and local champagnes NewsdayTV's Doug Geed takes us "Out East," and shows us different spots you can visit this winter.
