A rally pushed the Dow Jones industrials back over 10,000 after the stock market sank to its lowest levels of the year Tuesday. The late-day rebound did nothing to erase lingering worries about Europe’s debt crisis.
The Dow plunged more than 250 points after the opening bell and stayed under 10,000 most of the day, then charged back to finish down only 22 when signals from Washington suggested banks would not be forced to sell their lucrative derivatives units as part of financial reform.
But investors are still concerned about European debt, and that’s likely to mean more turbulent days like Tuesday. The market worries that even austerity measures by governments there will not be enough to fix the problem and fight off a prolonged economic slump in Europe, or even another global recession.
“It seems like the Europeans are playing ‘tag, you’re it’ – first it was Greece, and now it’s maybe Spain or Portugal,” said Jonathan Corpina, a New York Stock Exchange floor trader and president of Meridian Equity Partners.
“We know someone else is next. The problem is that it seems like every plan in place isn’t going to satisfy the needs,” he said.
Britain’s Queen Elizabeth opened Parliament with a warning of hard times, saying in a speech on behalf of Britain’s new government that there would be budget cuts because “the first priority is to reduce the deficit and restore economic growth.”
Other European countries are imposing budget cuts as well, trying to control their debt. Investors are concerned that these steps will stifle economic growth, and that the growth of other countries, including the U.S., will inevitably be stunted.
Besides the financial crisis in Europe, investors were reminded that political issues, such as tension between North and South Korea, can threaten economic growth. Analysts said the unresolved Gulf of Mexico oil spill also contributed to the foul mood.
It was enough to send stocks into a deep dive after the opening bell. In just the first half-hour of trading, the Dow sank to 9,774.48, its lowest reading of the year so far.
For much of the day, the Dow threatened to set a new closing low for the year. The average is down more than 10 percent in just the past month.
- Associated Press