Stocks closed lower on Wednesday as investors continued to fret over political instability in Greece, sending the Dow Jones industrial average to its sixth straight decline.
The Dow closed at 12,835.06, down 97.03 points or 0.8 per cent. Over the past six sessions, the blue-chip index has fallen a total of 3.4 per cent. The broader S&P 500 closed at 1354.58, down 9.14 points or 0.7 per cent – hitting a two-month low. In Canada, the S&P/TSX composite index closed at 11,675.01, down 29.73 points or 0.3 per cent.
The ugly situation in Europe continues to raise the level of anxiety among investors. In Greece, political talks have failed to form a coalition government after weekend elections, raising fears that an anti-austerity backlash in the country will force it out of the euro zone, with potentially unsettling consequences for everyone.
Despite earlier concerns that the euro zone was about to cut off Greece from financial assistance – earlier cash has helped keep the country from sliding into a messy default – the European Financial Stability Facility did agree on Wednesday to forward most of the previously agreed financing. The news helped ease some of the pressure on stocks. The Dow, for example, had been down more than 180 points in earlier trading.
However, bond yields continued to reflect concerns in the euro zone. In particular, the yield on Spain’s 10-year government bond surged above 6 per cent, hitting its highest level of the year and raising concerns about the country’s ability to meet higher borrowing costs. There, the banking system is in crisis following a collapse of the real estate market.
Meanwhile, investors turned to the usual havens: German and U.S. government bonds. The yield on Germany’s 10-year bond approached a record low of close to 1.5 per cent, while the 10-year U.S. Treasury bond retreated to 1.83 per cent.
Gold was no haven, falling to $1,594.20 (U.S.) an ounce, down $10.30. However, Canadian gold producers rebounded from earlier losses: Barrick Gold Corp. rose 2.6 per cent and Goldcorp Inc. rose 3.5 per cent.