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Stocks Tumble As Worries About Europe Return

Friday, 14 May 2010 04:34 PM

 

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Stocks tumbled for a second day Friday after concerns grew that the deep spending cuts under Europe's bailout plan would slow a global recovery.

The Dow Jones industrial average ended down 163 points but closed well off its lows of the day. The Dow and other major stock indexes still posted big gains for the week after rocketing higher Monday on hopes that a bailout plan for Europe would prevent a debt crisis in Greece from spreading.

The latest drop followed a slide of more than 3 percent in European markets. The euro dropped to a 19-month low against the dollar.

Investors seeking safety piled into Treasurys, the dollar and gold, which hit another record. Crude oil sank nearly 4 percent, and an indicator of stock market volatility jumped.

Currency traders have been moving out of the euro throughout the week because of concerns that cost-cutting measures in countries like Greece, Spain and Portugal would slow economic activity on the continent and elsewhere. Now stock investors are also looking at those same problems.

Shifting sentiment about the problems in Europe whipsawed the market during the week. Major indexes posted their biggest gains in more than a year on Monday after a nearly $1 trillion rescue package from the European Union and International Monetary Fund raised hopes that debt-strapped EU countries wouldn't be a drag on a global rebound.

But the glow from the bailout package faded during the week, pushing the euro down sharply against the dollar. The spike in the dollar hit the prices for oil and other commodities, hurting major U.S. energy and materials companies.

"Clearly the action in the euro is reflecting the fact that at least currency investors don't think the bailout plan plus the austerity measures are sufficient," said Uri Landesman, president of Platinum Partners in New York. "The euro is leading the market down."

Investors now worry that the spending cuts in Europe being called for in the bailout package will curtail the ability of weaker countries like Spain and Portugal to grow their way out of a recession. More strikes are expected in Spain and Greece as workers protest cuts in pensions and other public spending.

The euro, which is used by 16 countries, slid as low as $1.2359 in New York, its weakest point since October 2008. The euro has dropped more than 6 percent since the beginning of the month and is close to its lowest level in four years.

There were also concerns Friday about corporate profits. Shares of credit card companies tumbled after the Senate voted to force them to reduce fees for debit card transactions. Visa fell 9.9 percent, while Mastercard lost 8.6 percent.

According to preliminary calculations, the Dow fell 162.79, or 1.5 percent, to 10,620.16. The Dow had been down nearly 246 points. It has fallen seven of the last nine days.

The Standard & Poor's 500 index lost 21.76, or 1.9 percent, to 1,135.68, while the Nasdaq composite index fell 47.51, or 2 percent, to 2,346.85.

For the week, the Dow rose 2.3 percent, the S&P 500 index added 2.2 percent and the Nasdaq gained 3.6 percent.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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