New doubts about Greek aid flatten markets
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 257.71, or 2.3 per cent, to 10,894.12, its lowest level in about a month.
It had been down as much as 283 points at its low of the day, its biggest drop since February 4.
The Standard & Poor's 500 index fell 30.29, or 2.5 per cent, to 1,171.97. The Nasdaq composite index fell 78.01, or 3.1 per cent, to 2,420.73.
Treasury prices rose on increased demand for safety investments.
In other markets, Britain's FTSE 100 and Germany's DAX index each dropped 2.6 per cent, France's CAC-40 tumbled 3.3 per cent and Greece's main index fell 6.7 per cent.
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 US$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 jeopardise 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.
The biggest drop in stocks since February 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 drop, Tuesday, after the climb Monday, was reminiscent of the fearsome swings in the fall of 2008 and early 2009 when investors 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 with 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 sceptical that Europe can act on its own to restore the credibility of its shared currency, the euro.
Investors rushed to safety holdings like treasuries, pushing down yields. The yield on the benchmark 10-year Treasury note fell to 3.60 per cent from 3.69 per cent late Monday.