Tuesday’s post-U.S.-holiday gains were wiped out Wednesday in a global equity selloff prompted by yet more worries about Europe.
Debt yields rose in Italy, Greece and Spain. A Spanish bank-bailout plan announced over the weekend raised fresh concerns about whether that country was headed down the same path as Greece, which may ultimately drop the Euro. The interest rate on 10-year Spanish debt hit its highest level since the country joined the euro zone.
Yields in countries perceived as safe — the U.S, Germany, and Canada, as examples — fell, sending bond prices higher. U.S. 10-year Treasury yields hit their lowest level on record, closing at 1.62 per cent. Canada’s 10-year bond yielded 1.785 per cent at day’s end.
“Governments and banks everywhere are now openly making contingency plans for the possible break-up of the euro zone or, at least, the exiting of Greece from the monetary union,” says BMO chief economist Sherry Cooper.
The Dow Jones industrial average closed at 12,419.86, down 160.83 points or 1.28 per cent. Intel Corp. was the only gainer among the 30 Dow components.
The broader S&P 500 closed at 1,313.32, down 19.10 points or 1.43 per cent, as all 10 of its sectors fell.
In Canada, the S&P/TSX composite index fell to 11,433.20, down 176 points or 1.52 per cent. Energy and mining stocks drove the decline.
While not even among the 10 biggest decliners on the full TSX, Research In Motion made the most noise, falling 7.1 per cent after Tuesday’s after-market disclosure that it expected a first-quarter loss and had hired investment banks to assist in exploring its options. The shares traded as low as $10.30 — avoiding the single digits — and closed at $10.66.
U.S. economic data did nothing to stem pessimism: U.S. pending home sales fell by 5.5 per cent in April, a worse-than-expected mark and an end to three straight monthly increases.
Oil closed at $87.82 (U.S.) on the New York Mercantile Exchange, down 3.2 per cent. It was the first close below $88 since last October.