Stocks slide as new doubts about Greek aid emerge

(AP) — Stocks plunged around the world Tuesday as fears spread that Europe's attempt to contain Greece's debt crisis would fail. The euro fell to its lowest point against the dollar in a year.

The Dow Jones industrial average fell 225 points, its biggest drop in three months. The slide erased a 143-point gain from Monday. The Dow and broader indexes each fell more than 2 percent. Treasury prices rose on increased demand for safe investments.

Stocks have seesawed in the past week as Europe's efforts to agree on a bailout package for Greece proceeded in fits and starts. An agreement finally came together over the weekend, but its ballooning size of $144 billion has investors worried that Europe would have an even tougher time assembling an aid package if a larger country such as Spain or Portugal were to get in trouble. Traders are concerned that weakening economies in Europe could jeopardize the recovery in this country.

The market's plunge wasn't a surprise to some analysts who have warned for weeks that stocks were due for a retreat. After Monday's rally, the Standard & Poor's 500 index was up almost 14 percent from its 2010 low of 1,056.74, reached Feb. 8. Investors have spent the past three months largely shrugging off the problems in Europe and focusing instead on the continuing signs of improvement in the U.S. economy.

The drop in stocks brought a reminder that it doesn't take much to rattle investors who are on alert for anything that could disrupt the economic recovery. The avalanche of selling could continue while investors await answers on Greece but analysts said most drops are likely to be mild because buyers have for months been using pullbacks as opportunities to buy.

The selling Tuesday after the climb Monday was reminiscent of the fearsome swings in the fall of 2008 and early 2009 when investors were panicked over how bad the recession would get.

Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York, said the sudden turns in the market are to be expected as traders wrestle concerns that stocks are overheated.

"The market has kind of gotten itself into a volatile trading range," Fullman said.

The trouble in Greece gave investors enough reason to worry that other cash-strapped European governments could follow Greece into asking for emergency loans. Traders have been skeptical that Europe can act on its own restore the credibility of its shared currency, the euro.

Mike Shea, managing partner at Direct Access Partners LLC in New York, said investors are concerned that the bailout for Greece and possibly other countries could threaten a rebound in other parts of Europe.

"It's not as though even the strongest economies of Europe are doing particularly well," Shea said. "Why is a plumber in Germany going to bail out Greece or Portugal?"

According to preliminary calculations, the Dow fell 225.06, or 2 percent, to 10,926.77, its lowest close since April 7. The Dow had been down as much as 283 points at its low of the day.

The slide was the Dow's fifth move of more than 100 points in the past six days. The Dow jumped 143 points Monday after falling 159 on Friday.

The S&P 500 index fell 28.66, or 2.4 percent, to 1,173.60. The Nasdaq composite index fell 74.49, or 3 percent, to 2,424.25.