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Traders work on the floor of the New York Stock Exchange before the closing bell on December 28, 2011 in New York City. The Dow fell nearly 140 points to close at 12,151,41 on news that the European Central Bank received another record level of deposits on European leander concerns. (Mario Tama/Mario Tama/Getty Images)
Traders work on the floor of the New York Stock Exchange before the closing bell on December 28, 2011 in New York City. The Dow fell nearly 140 points to close at 12,151,41 on news that the European Central Bank received another record level of deposits on European leander concerns. (Mario Tama/Mario Tama/Getty Images)

The close: Commodities clobber Dow, TSX Add to ...

Stocks were hit hard on Wednesday, ending a five-day winning streak for the S&P 500 as signs of financial trouble persist in Europe.

The Dow Jones industrial average closed at 12,151.41, down 139.94 points or 1.1 per cent. The broader S&P 500 closed at 1,249.64, down 15.79 points or 1.3 per cent. In Canada, the S&P/TSX composite index closed at 11,728.41, down 198.26 points or 1.7 per cent.

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The day began on an upbeat note, with Italy conducting a successful auction of short-term government bonds, resulting in strong investor demand and lower yields. However, longer-term bonds didn’t play along: The yield on the 10-year bond rose above 6.9 per cent – in the zone that some observers believe will lead to funding problems for the country – ahead of a much-anticipated auction on Thursday.

At the same time, it is becoming clear that new money received by European banks is being parked at the European Central Bank rather than being used to buy government bonds or lend to other banks. Overnight deposits at the ECB are at record highs, suggesting that banks are nervous about taking any risks.

Commodity producers were hit especially hard in the selloff after prices retreated. Gold fell to $1,564.10 (U.S.) an ounce, down $31.40, to its lowest level since July. Among gold producers, Barrick Gold Corp. fell 3.6 per cent.

Energy stocks were also hit after crude oil dipped below the $100 per barrel threshold. It closed at $99.36 a barrel, down $1.98. Suncor Energy Inc. and Canadian Natural Resources Ltd. fell 2.5 per cent each.

Among U.S. stocks, Bank of America Corp. fell 3.6 per cent and Alcoa Inc. fell 3.1 per cent. However, Sears Holdings Corp. found some stability, falling just 0.2 per cent. On Tuesday, the retailer plunged 27 per cent after announcing that it would close stores following a weak holiday shopping season.

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