NEW YORK, May 31 — US stocks tumbled yesterday as surging bond yields in Spain and Italy ratcheted up tensions in financial markets about Europe’s ability to solve its growing debt crisis.
Angst over Europe drove investors away from risky assets and into safe havens. US Treasury benchmark yields fell to their lowest in at least 60 years, prices for crude fell more than 3 per cent and the euro dropped below US$1.24 to a 23-month low.
The S&P 500 has fallen nearly 6 per cent in May, heading for its worst monthly performance since September as traders focused on Europe. However, US data later in the week, including first-quarter gross domestic product and monthly payrolls, could delink Wall Street from overseas headlines.
Yields rose sharply at an Italian sale of five- and 10-year debt, and investors worried about Spain’s plans to raise new funds to shore up its banks even as borrowing costs rose there.
“You’re seeing the deterioration in Spain gain magnitude and that is worrisome because it involves a larger bailout (than Greece’s) and far more capital to alleviate banking problems,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
“Traders and long-term investors believe Europeans are working on solutions. But the ultimate question is will capital markets give them the time before a liquidity issue becomes a solvency issue.”
Adding to worries was Greece’s upcoming election, which could determine if the country will stay or not in the euro zone.
More than six issues fell on the New York Stock Exchange for every one that rose. The CBOE volatility index, a gauge of market anxiety, jumped 14.8 per cent, its largest daily gain in almost three months.
The Dow Jones industrial average lost 160.83 points, or 1.28 per cent, to 12,419.86. The S&P 500 Index dropped 19.10 points, or 1.43 per cent, to 1,313.32. The Nasdaq Composite fell 33.63 points, or 1.17 per cent, to 2,837.36.
Facebook shares briefly dropped below US$28 (RM84) to trade more than US$10 below their initial public offering price. Shares closed down 2.3 per cent at US$28.19, their sixth decline in eight days of trading.
Energy was the worst performing of the top 10 S&P sectors, down 3 per cent, while US crude futures fell 3.5 per cent. Oil field service company Halliburton Co fell 5.2 per cent to US$30.36.
The PHLX housing sector index dropped 4.1 per cent after US economic data showed contracts of home resales unexpectedly fell in April to a four-month low, dealing a blow to optimism the housing sector may have hit a bottom.
US-traded shares of Research In Motion fell 7.8 per cent to US$10.35 after the BlackBerry maker warned it would likely report a quarterly operating loss. Analysts cut their price targets on RIM shares and said the odds of a turnaround at the company are fading.
Shares of Booz Allen Hamilton jumped 13.3 per cent to US$16.86 after the government consulting firm reported a stronger-than-expected quarterly profit.
Pep Boys Manny, Moe & Jack lost a fifth of its market value after private equity firm Gores Group walked away from a US$791 million deal to buy the auto parts retailer. Shares closed down 19.8 per cent at US$8.89.
About 6.3 billion shares changed hands on the New York Stock Exchange, the Nasdaq and Amex, below the year-to-date average of about 6.81 billion shares. — Reuters