Stocks slumped on Tuesday over ongoing uncertainty about the European debt crisis, with concerns rising that Greece’s coming referendum will scuttle the recent bailout agreement among European leaders.
The Dow Jones industrial average closed at 11,657.96, down 297.05 points, or 2.5 per cent. The move brings its two-day decline to about 575 points. The broader S&P 500 closed at 1218.28, down 35.02 points, or 2.8 per cent. In Canada, the S&P/TSX composite index closed at 12,115.10, down 136.96 points, or 1.1 per cent.
The sharp declines follow Monday’s losses, which ended what had been an exceptional run for stocks throughout most of October. Just five days ago, markets celebrated an agreement among European leaders to deal with the sovereign-debt crisis, which involved Greek bondholders taking a 50 per cent haircut on their investments.
Now, though, that agreement is on the ropes – and new concerns have sprung up. On Monday, Greece’s leader said the country would vote on whether to proceed with the Euro-deal, raising fears that the country will vote it down and send the euro zone into chaos.
At the same time, yields on Italian government bonds have been rising, feeding concerns that the country will not be able to afford to issue new debt. And in Spain, economic growth stagnated in the third quarter, suggesting that recent austerity measures there haven’t worked to bring the country’s high debt in line.
Meanwhile, the market is worried that MF Global’s failure – the U.S. firm sought bankruptcy protection on Monday after making ill-timed bets on European debt this year – will spill over into other financial firms. Indeed, U.S. bank stocks were hit hard in Tuesday trading, with Bank of America Corp. down 6.3 per cent, JPMorgan Chase & Co. down 5.9 per cent and Morgan Stanley down 8 per cent.
Canadian financials were also down sharply. Royal Bank of Canada fell 3.3 per cent and Toronto-Dominion Bank fell 3.1 per cent.
But the losses were widespread, with 96 per cent of stocks within the S&P 500 ending the day lower. General Electric Co. fell 4.1 per cent and Boeing Co. fell 4 per cent. Even defensive stocks were hit: Procter & Gamble fell 2 per cent and Coca-Cola Co. fell 1.9 per cent.
Among commodities, crude oil fell to $92.19 (U.S.) a barrel, down $1. Gold was no haven, falling to $1,711.80 an ounce, down $13.80. However, some gold producers rallied after hedge fund manager David Einhorn said that gold producers should close the gap with gold itself, even if gold flatlines. Barrick Gold Corp. rose 2.2 per cent.
Among other commodity producers, Suncor Energy Inc. fell 2.6 per cent and Teck Resources Ltd. fell 4.7 per cent.Report Typo/Error