Stocks Sink More than 1.5% Amid Euro Worries
Stocks continued to plunge Tuesday as investors focused on the European Union's efforts to address Ireland's debt troubles.
The Dow Jones Industrial Average fell nearly 200 points after eking out a gain Monday after stocks slumped in the last hour of of the trading session.
The S&P 500 and the Nasdaq also slid. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 21.
The key S&P 500 sectors all skidded, led by materials, telecom and energy.
The dollar [.DXY 79.13 0.61 (+0.78%)
], meanwhile, rose against a basket of currencies , although it was flat against the euro as investors took heart from stronger-than-expected economic data in Germany.
In Europe, finance ministers were working to stem a crisis involving Ireland's banks, to avoid a spillover into other nations. The Irish government will be making a statement about the situation at noon.
Commodities fell on speculation China may take more aggressive steps than initially thought to stem inflation, as well as enacting food price controls. The price of oil skidded more than 2 percent to just above $83 a barrel, while goldfell below $1,340.
In U.S. economic news, an index of home building sentiment in the U.S. rose slightly, but less than expected, for a second month, although the index remains historically low, according to a survey released by the National Association of Home Builders/Wells Fargo Housing Market on Tuesday. The index rose to 16 from 15 last month.
The producer price index rose 0.4 percent in October, the same level as September, but core PPI, which excludes volatile food and energy prices, fell 0.6 percent, after rising 0.1 percent in September. The drop was the biggest since July 2006, and has triggered disinflation concerns.
U.S. industrial production was weaker-than-expected in October, coming in flat, according to Federal Reserve data released Tuesday. Economists surveyed by Reuters had expected a 0.3 percent gain. Manufacturing rose 0.5 percent, but utilities output dropped 3.4 percent, dragging down the overall index.
The capacity utilization rate, a measure of slack in the economy, was flat at 74.8 percent, 5.8 points below average from 1972-2009.
Foreign buying of U.S. debt fell in September, although China and Japan, top buyers, added to their holdings, U.S. Treasury Department said Tuesday. The net long-term capital inflow fell to $81 billion in September, from an inflow of $128.7 billion a month earlier.
Revised tax treaties between Switzerland and other European countries may cause UBS to lose up to $41 billion in customer withdrawals, UBS said Tuesday. The bank said Tuesday that "15-40 billion francs are still at risk as a result of changes in the tax regulations."
New York Fed President Bill Dudley backed up comments from Treasury Secretary Timothy Geithner last week by saying that Fed policy is not intended to weaken the dollar.
Treasury international capital flow data is due at 9 a.m. The National Association of Home Builders releases its housing index at 10 a.m.
European shares were lower, with mining stocks in the red. European finance ministers will be meeting in Brussels to discuss a mechanism for resolving the euro-zone crisis. A possible bailout of Ireland was also expected to be discussed.
Asian stocks also saw heavy selling. The Shanghai Composite Index fell 4 percent on worries about rate tightening in China to combat inflation. In commodities, the price of gold and oil gave back some of their recent gains as the dollar rose versus the yen.
Coming Up This Week:
TUESDAY: Microsoft shareholders meeting, Atlanta Fed Pres Lockhart speaks.
WEDNESDAY: Weekly mortgage applications, CPI, housing starts, oil inventories, St. Louis Fed Pres Bullard speaks, GM IPO pricing, LA auto show kicks off, Qualcomm analyst meeting; Earnings from Target and Applied Materials.
THURSDAY: Weekly jobless claims, leading indicators, Philadelphia Fed survey, Cisco shareholder meeting; Earnings from Dell and Gap.
FRIDAY: Bernanke speaks at ECB Central Banking Conference, Harry Potter movie premieres.
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