Stocks plunge on European debt worries

By The Associated Press

Published: 9:57 AM - 07/23/12
Last updated: 10:00 AM - 07/23/12

NEW YORK - Fear over European debt surged Monday and drove stocks sharply lower around the world. The Dow Jones industrial average plunged more than 220 points in early trading.

The price of crude oil dropped more than $3.50 per barrel to below $90, and yields for U.S. government bonds sank to record lows, a sign that traders were seeking the safety of American debt. The euro hit a two-year low against the U.S. dollar.

Borrowing costs rose sharply for Spain and Italy, a signal of renewed investor worries that the Spanish government will need an international bailout.

Spain's market regulator said it was temporarily banning short-selling of shares on its stock indexes. In a short sale, an investor seeks a profit by betting that the price of a certain stock will fall.

Strong selling rattled European markets. The main stock index dropped more than 7 percent in Greece, 3 percent in Spain and Germany and 2 percent in France and Britain. Asian stocks were also sharply lower.

In the United States, the Dow was down as much as 225 points. At 9:40 a.m. EDT, it was off 215 points at 12,605. The Dow has had only four declines of 200 points this year, including its worst, a 274-point drop on June 1.

The Standard & Poor's 500 index fell 21 points to 1,340, and the Nasdaq composite index plunged 66 points to 2,859.

Bank stocks, which tend to take a hit when fear flares in Europe, were among the biggest losers. Citigroup stock dropped more than 2 percent and Bank of America 1.6 percent.

The euro slipped just below $1.21 against the dollar, its lowest reading since June 2010.

There were also signs that a global economic slowdown is hitting U.S. companies that rode out the recession fairly well, largely because currencies overseas have tumbled against the dollar.

While global sales at McDonald's restaurants open at least a year rose 3.7 percent, profits slid by about the same rates due to currency exchange.

Stock in the world's largest hamburger chain slid 2 percent in premarket trading after falling short of most Wall Street expectations for both net income and revenue.

A forecast from a Chinese central bank adviser that China's economy could grow at a slower pace in the third quarter deepened concerns about the global slowdown.

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Source: http://recordonline.com/apps/pbcs.dll/article?AID=/20120723/BIZ/120729911/-1/rss06

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