Skip to main content

A trader works on the floor of the New York Stock Exchange on October 7, 2011 in New York City.

Spencer Platt/Spencer Platt/Getty Images

North American stocks sank at the start of trading on Wednesday morning, after Tuesday's brief enthusiasm over the upcoming departure of Italy's prime minister Silvio Berlusconi gave way to some ugly realities: Italian government bond yields have soared above 7 per cent, signifying financial problems ahead.

The Dow Jones industrial average fell 234 points or 1.9 per cent, to 11,937. The broader S&P 500 fell 23 points or 1.8 per cent, to 1253. In Canada, the S&P/TSX composite index fell 177 points or 1.4 per cent, to 12,312.

The declines were broad, affecting all 30 members of the blue-chip Dow, and all but one stock within the S&P 500 (that would be Yahoo Inc., which rose slightly).

Story continues below advertisement

Financials were among the worst hit, with JPMorgan Chase & Co. down 3.3 per cent and Bank of America Corp. down 3.1 per cent. In other moves, Alcoa Inc. fell 3.3 per cent and General Electric Co. fell 2.1 per cent.

Among Canadian, stocks, energy producers were hard hit, with Suncor Energy Inc. down 3.6 per cent. Banks fell too: Royal Bank of Canada was down 1.3 per cent. However, gold producers held up reasonably well, with Barrick Gold Corp. up 0.6 per cent.

The declines came as investors wondered whether Europe would be able to absorb the shock of having to possibly rescue Italy. Analysts say Italy will not be able to refinance its debt at current rates, which will force it to either enact deep austerity measures or to receive financial assistance to prevent a default. Greece, Portugal and Ireland each required bailouts when their bond yields rose above 7 percent. But unlike those countries, Italy's $2.6-trillion in debt is too large for other European nations to bail out.

In Greece, the two main political parties are still engaged in power-sharing negotiations and have yet to name a prime minister to lead the interim government. The new government must pass an austerity package to receive the next loan installment in its bailout. Without the funds, Greece could default before Christmas.

Report an error Editorial code of conduct Licensing Options
As of December 20, 2017, we have temporarily removed commenting from our articles as we switch to a new provider. We are behind schedule, but we are still working hard to bring you a new commenting system as soon as possible. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to