NEW YORK – The stock market extended its slide Wednesday after investors couldn’t shake their concerns about European countries’ big debt loads.
The Dow Jones industrial average ended down about 59 points to put its two-day drop at 284. In the bond market, treasury prices rose and pushed down interest rates for a second day.
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A drop in the euro and a rise in the dollar continued to ram markets around the world. The stronger dollar hurts U.S. stocks by cutting into profits of U.S. companies that do business abroad. A higher dollar also hurts commodity prices by reducing demand from foreign buyers.
Investors are concerned that a $144 billion aid package for Greece won’t be adequate to keep debt problems in Europe from spreading. There also were questions about whether the bailout would amount to more than a short-term fix for Greece. Investors don’t want the trouble in Greece to spill to other countries and disrupt a global rebound.
Swings in global stock markets have intensified in the past week. Wednesday was the sixth time in seven days that the Dow moved up and down by more than 100 points.
Investors have questions about Greece, but they’re also awaiting the government’s April jobs report on Friday and monitoring Washington’s overhaul of the rules that govern financial companies.
The problems in Greece are rattling the market partly because they are reminiscent of the subprime mortgage crisis in the U.S. that at first appeared contained. That bad debt cascaded through the world’s financial system and pushed the U.S. economy into recession at the end of 2007.
German Chancellor Angela Merkel on Wednesday encouraged lawmakers in Berlin to rush the approval of Germany’s share of the Greek rescue plan by Friday. Analysts say delays could bring more upheaval to global markets.
Investors fear that if a tourniquet for Greece’s financial problems doesn’t hold, it would be harder to help larger countries like Spain and Portugal that also face big deficits. Moody’s Investors Service warned Wednesday that it could cut Portugal’s credit rating two notches in the next three months. Standard & Poor’s cut Portugal’s credit rating last week.
Adam Gould, senior portfolio manager at Direxion Funds in New York, said the uncertainty about what will happen in Europe is keeping investors from buying dips in the market the way they have for most of the 14-month climb in stocks.
“This is really a story that has the market spooked,” Gould said. “First it was Greece. Now it’s Spain and Portugal.”
Fixing Greece’s financial problems won’t be easy. Riots erupted in Athens on Wednesday over tax hikes and government spending cuts that the International Monetary Fund and other European nations are requiring as part of the bailout. Three people were killed in the protests.
The problems of heavy government debts are a big test for the euro. Sixteen countries use the common currency. The euro fell against the dollar, sliding as low as $1.2805 in New York. That was its weakest level since March 2009.
The Dow fell 58.65, or 0.5 percent, to 10,868.12. It had been up as much as 20 points and down nearly 112 points.
The Dow is down 2.5 percent in two days, its steepest back-to-back drop in three months.
The broader Standard & Poor’s 500 index fell 7.73, or 0.7 percent, to 1,165.87, while the Nasdaq composite index fell 21.96, or 0.9 percent, to 2,402.29.
Bond prices rose. The yield on the benchmark 10-year Treasury note fell to 3.54 percent from 3.60 percent late Tuesday.
Gold rose. Crude oil fell $2.77 to $79.97 per barrel on the New York Mercantile Exchange.
Kevin Mahn, chief investment officer at Hennion & Walsh in Parsippany, N.J., said the debt problems are severe but not new. He said investors had been looking for an excuse to sell stocks after the market’s steep 14-month climb. Mahn expects the big back-and-forth moves will continue.
“I think it’s going to be more of an extended pause than a correction,” Mahn said.
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