Stocks plunge on Europe debt crisis fears

BY DANIEL WAGNER

AND FRANCESCA LEVY

The problems that weighed down stocks all summer show no sign of letting up.

U.S. stocks plunged Friday, erasing the week's gains, amid rising fears about fallout from Europe's debt crisis. Investors, seeking safety, sent the yield on the 10-year Treasury note to the lowest level in five decades.

The Dow Jones industrial average fell 303.68 points, or 2.7 percent -- its steepest decline in more than three weeks -- to close at 10,992.13. The Dow, at several points, approached a 400-point decline in afternoon trading. The Standard & Poor's 500 fell 31.67, or 2.7 percent, to 1,154.23. The Nasdaq composite fell 61.15, or 2.4 percent, to 2,467.99.

"Markets always vacillate between fear and greed, and today we're coming down pretty much all on the fear side," said Kim Caughey Forrest, equity research analyst at Fort Pitt Capital Group.

The resignation of Juergen Stark, the top economist at the European Central Bank, revealed deepening divisions over how to solve Europe's economic problems.

Traders fear that one of Europe's heavily indebted economies could collapse. That would send shock waves through the global banking system and make it difficult for other European countries facing default to borrow money. Such an outcome would likely tip the world economy back into recession.

In the United States, the economy faces slowing growth and a stubbornly high unemployment rate. President Barack Obama unveiled a $447 billion jobs program Thursday night, but Wall Street is not convinced that the proposal can pass through a divided Congress.

All three U.S. indexes were lower for the week. The Dow was down more than 2 percent. It has fallen in five of the past six weeks, and four of the past five trading sessions.

Nervous investors rushed to buy investments seen as safe, sending Treasury yields to historic lows. The yield on the 10-year Treasury note plunged to its lowest level since the Federal Reserve Bank of St. Louis began keeping daily records in 1962. It fell to 1.93 percent from 1.99 percent late Thursday.