New York: US stocks sagged on Wednesday as more signs emerged that the fallout from the Greek debt crisis could spread to bigger European economies.
The euro hit a 14-month low as investors shunned the debt of weaker euro zone countries and jumped into safe-havens. US Treasury prices and the dollar surged on fears Greece’s debt problems could hinder global growth.
On Wall Street, resource and industrial stocks, sensitive to the outlook of global economic growth, weighed on the market. Energy shares were also pressured as the price of oil fell nearly $3 to $79.97 a barrel.
Trading volume was among the highest this year, and while losses on the major indexes were only moderate, the overall market tone was decidedly bearish. On the New York Stock Exchange four stocks fell for every one that rose.
“The focus right now is primarily on how this is going to play out in Europe, how much damage is going to be done,” said Marc Pado, US market strategist at Cantor Fitzgerald & Co, in San Francisco.
European leaders warned the debt crisis could spread beyond Greece, and Moody’s Investors Service said Portugal could be next to have its debt downgraded, stoking fears that a “contagion” effect could cause complicated international debt arrangements to topple like dominoes.
German Chancellor Angela Merkel gave a stark warning of what was at stake. “There is no alternative to the aid to be agreed for Greece if we want to secure the financial stability of the euro area,” she told lawmakers in Berlin.
The cost to insure the debt of Germany and France hit their highest levels in more than a year on Wednesday, as weakness spread through credit markets on concern about widening fiscal challenges for peripheral European nations.
The Dow Jones industrial average dropped 58.65 points, or 0.54%, to 10,868.12. The Standard & Poor’s 500 Index fell 7.73 points, or 0.66%, to 1,165.87. The Nasdaq Composite Index lost 21.96 points, or 0.91%, to 2,402.29.
The S&P Energy Index fell 1.5% and Chevron Corp shares eased 0.7% to $80.19.
Volume in put options, giving investors the right to sell the SPDR S&P 500 and the tech-heavy PowerShares QQQ, exchange-traded funds that track underlying equities, was again active in a sign some investors were seeking to insure their portfolios against losses.
Wall Street’s losses were more modest than Tuesday’s more than 2% decline. Losses were also were more muted than those in Europe, where the pan-European FTSEurofirst 300 shed 1% on Wednesday.
Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles, said traders were looking for buying opportunities generated by the volatility.
“Bigger picture, US investors continue to be of the opinion that corrections are to be bought,” said James.
Big-cap consumer staples names were among the winners on the Dow, including retailer Wal-Mart Stores Inc, up 1.4% at $54.77 as it rose for a second straight day, and Coca-Cola Co, up 0.9% to $53.66.
Protests in Greece against the government’s planned austerity plan turned violent, underscoring the difficulty faced by cash-strapped governments trying to force spending cuts.
Protesters clashed with police as tens of thousands of strikers marched. Three people died when rioters set a central Athens bank ablaze.
The flight from risky assets pushed up the US dollar, considered a safe-haven investment, and the greenback gained 1% against a basket of major currencies.
Generally positive data on the US private sector job market and the economy’s services sector cushioned the negative tone.
The Institute for Supply Management said the pace of growth in the US services sector, which accounts for some two-thirds of US economic activity, was unchanged in April compared with March, while a separate report showed the US private labor sector added 32,000 jobs in April.
About 12.33 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, more than last year’s estimated daily average of 9.65 billion and the fourth highest this year.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 4 to 1, while on the Nasdaq, about three stocks fell for every one that rose.