- Title: USA: Wall Street plunges as European debt plight worsens
- Date: 10th November 2011
- Summary: CHICAGO, ILLINOIS, UNITED STATES (NOVEMBER 9, 2011) (ORIGINALLY 4:3) (REUTERS) (SOUNDBITE) (English) JIM BIANCO, PRESIDENT, BIANCO RESEARCH, SAYING: "I think the optimism that investors had regarding a positive outcome in Europe is dead for right now. Now maybe the stock market can regain optimism on another front like the economy here does better or the Fed does QE3, but Europe itself, right now, any hope that there was going to be something positive is gone."
- Embargoed: 25th November 2011 12:00
- Location: Usa, Usa
- Country: USA
- Topics: Economy
- Reuters ID: LVAC1JLRAJS4N6AE4M4JZX3BIBAY
- Story Text: U.S. stocks tumbled 3 percent on Wednesday (November 9) in the market's worst day since mid-August as a spike in Italian bond yields signaled the European debt crisis had worsened.
All 10 S&P sectors were down, but S&P financials were the hardest hit on worries about European exposure, dropping 5.4 percent.
U.S. stock markets have grown more chaotic in response to rising volatility in European debt markets, and investors have trouble keeping up with a steady stream of headlines and pricing in how the crisis might play out.
"I think the optimism that investors had regarding a positive outcome in Europe is dead for right now. Now maybe the stock market can regain optimism on another front like the economy here does better or the Fed does QE3, but Europe itself, right now, any hope that there was going to be something positive is gone," said Jim Bianco, president of Chicago-based Bianco Research.
The Dow Jones industrial average was down 389.24 points, or 3.20 percent, at 11,780.94. The Standard & Poor's 500 Index was down 46.82 points, or 3.67 percent, at 1,229.10. The Nasdaq Composite Index was down 105.84 points, or 3.88 percent, at 2,621.65.
The spread of the crisis to Italy has lifted it to a new level. European Union sources said German and French officials were discussing drastic plans, including an overhaul that would possibly create a smaller euro zone.
Italy's bond yields shot up to 7.502 percent, a new high since the euro was introduced in 1999. Investors were forced to sell Italian bonds after a European clearing house increased the collateral needed to borrow against that debt.
The 7 percent level was the point where European nations, including Ireland and Portugal, had to seek bailouts as their financing costs ballooned.
General Motors Co slid 10.9 percent to $22.31 (USD) after the automaker said it would not break even for the year in Europe, as it had forecast, due to deteriorating conditions in the region.
The S&P 500 saw its worst daily percentage drop since August 18.
Prime Minister Silvio Berlusconi's insistence on elections instead of an interim government raised concerns of prolonged instability and delays to economic reform.
Italy has replaced Greece at the center of the euro zone debt crisis and is seen teetering on the cusp of requiring a bailout. A deal on forming a Greek national unity government collapsed while economic turmoil continued.
Reflecting growing market anxiety, the CBOE Volatility Index VIX jumped more than 30 percent, its biggest daily percentage gain since mid-August. The index usually moves inversely to the S&P 500 as traders use it as a hedge against falling stocks.
Among bank stocks, Morgan Stanley fell 9 percent to $15.76 (USD). Goldman Sachs Group Inc dropped 8.2 percent to $99.67 (USD). Bank of America Corp lost 5.7 percent to $6.16 (USD).
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