Investors ran from risky bets on Tuesday, sending North American stocks into a deep selloff while the U.S. dollar was again embraced as a safe haven.
The Dow Jones industrial average closed at 10,926.77, down 225.06 points or 2 per cent. The broader S&P 500 closed at 1173.60, down 28.66 points or 2.4 per cent - its biggest one-day dive since early February. In Canada, the S&P/TSX composite index closed at 12,030.86, down 165.65 points or 1.4 per cent.
While U.S. economic and earnings news was upbeat, and again pointed toward an economic turnaround, the attention on Tuesday was largely focused on events overseas.
In particular, investors were concerned that Greece's $145-billion (U.S.) bailout package from euro zone nations and the International Monetary Fund won't be enough to cover the country's costs, even as its budget deficit remains stubbornly high for years to come.
As well, fears are growing that Spain will run into big problems of its own.
Tuesday's downturn also comes as China makes modest adjustments to its monetary policy in an attempt to slow down its economy, triggering the usual concerns about slowing demand for exports and commodities.
Cyclical stocks took the worst hit among U.S. stocks, with Caterpillar Inc. falling 4.6 per cent, Alcoa Inc. falling 4.3 per cent and Dow Chemical falling 6.7 per cent.
Financials were also weak, with Bank of American down 2.8 per cent and JPMorgan Chase & Co. down 2.4 per cent.
The downturn was widespread, with about 96 per cent of stocks within the S&P 500 losing ground during the day. Big pharmaceutical stocks were among the few winners, with Pfizer Inc. up 2.1 per cent and Merck & Co. Ltd. up 1.5 per cent after they reported upbeat earnings.
The U.S. dollar was also one of the day's few winners. The U.S. dollar index rose 1.3 per cent, for its biggest one-day gain of the year. The Canadian dollar fell to 97.5 cents against the U.S. dollar, down 1.4 cents, bringing it to its lowest level in more than a month.
Meanwhile, commodities were hit hard, with the price of crude oil falling to $82.74 a barrel, down $3.45. Among Canadian energy stocks, Canadian Natural Resources Ltd. fell 2.5 per cent and Canadian Oil Sands Trust fell 4.2 per cent. Suncor Energy Inc. fared considerably better, falling just 0.9 per cent after reporting upbeat quarterly results.
The Canadian index was spared a sharper downturn because of rising gold producers. Barrick Gold Corp. rose 1.3 per cent while Goldcorp Inc. rose 1.6 per cent.
As well, Shaw Communications Inc. rose 2.1 per cent after investors applauded the company's move on Monday to buy a full stake in the television assets of CanWest Global Communications Corp.
David Berman