* Energy shares weakest of the day, utilities up
* Spanish, Italian yields rise on euro zone concerns
* European Commission calls for banking union
* U.S. shares of Research in Motion tumble
* Indexes off: Dow 1.1 pct, S&P 1.2 pct, Nasdaq 1.2 pct (Updates to midday trading)
NEW YORK, May 30 (Reuters) - U.S. stocks fell 1 percent on Wednesday as spiraling fears about the euro zone prompted investors to sell sectors tied to economic growth.
"We're being held hostage by Europe, by the increasing tensions in Spain," said John Kattar, chief investment officer at Eastern Investment Advisors in Boston, which manages $1.7 billion. "We're back to a risk-off mode, with cyclical sectors getting hit really hard. For the moment this seems to be the dominant trend."
Of the 10 S&P 500 sectors, only utilities were in positive territory, with the defensive group rising 0.1 percent. The biggest decliners on the day were energy, which tumbled 2.6 percent alongside a drop in crude oil prices, and consumer discretionary stocks, off 1.7 percent.
Europe's fiscal woes sent the yield on the safe-haven 10-year U.S. Treasury note to the lowest in 60 years and the euro to its lowest level in 23 months against the dollar. U.S. equities have been closely tethered to the currency's fortunes, with a 50-day correlation between the euro and the S&P 500 index at 0.91.
Yields on 10-year Spanish bonds moved closer to the 7 percent level, a point at which other nations in the bloc were forced to seek a bailout.
Spain is expected to issue new bonds shortly in an effort to fund its troubled banks despite the increased borrowing costs.
Adding to the concern, Italian 10-year yields topped 6 percent for the first time since January at a bond sale, raising concerns the region is vulnerable to a contagion. European shares dropped 1.7 percent.
The CBOE Volatility index jumped more than 11 percent, the biggest spike for the "fear index" since mid-April.
The PHLX oil service sector dropped 3.4 percent while crude fell 3.2 percent. Halliburton dropped 3.7 percent to $30.82.
There was momentary cause for optimism earlier in the day after the European Commission outlined a strategy to stabilize its banking system and boost growth, but that was dashed by the latest voting polls from Greece, which showed more support for the leftist SYRIZA party. Many analysts view next month's national parliamentary election as a major factor in whether Greece stays in the euro zone.
The Dow Jones industrial average was down 136.99 points, or 1.09 percent, at 12,443.70. The Standard & Poor's 500 Index was down 15.94 points, or 1.20 percent, at 1,316.48. The Nasdaq Composite Index was down 34.30 points, or 1.19 percent, at 2,836.69.
U.S. economic data showed contracts to purchase previously owned U.S. homes unexpectedly fell 5.5 percent in April to a four-month low, dealing a blow to more recent optimism the housing sector may have hit a bottom.
U.S. shares of Research In Motion Ltd tumbled 8.5 percent to $10.27 as the biggest percentage decliner on the Nasdaq 100 index. The company hired bankers for a far-reaching strategic review and to look for partnerships as the BlackBerry maker warned it would likely report a shock fiscal first-quarter operating loss.
Apple Inc slipped 0.2 percent to $570.81 after Chief Executive Tim Cook, speaking at the All Things Digital conference said technology for televisions was of "intense interest" but stressed the company's efforts would unfold gradually.
Macy's Inc reported better than expected May same-store sales on Wednesday, helped by its growing e-commerce business. Shares slipped 1.7 percent to $38.34.
Pep Boys-Manny, Moe & Jack plunged 21 percent to $8.73 after the automotive parts and service chain said the sale of the company to private equity firm Gores Group has been called off. (Editing by Dave Zimmerman)
Money Saving Queen And Just Between Friends Form Partnership - News On 6
Stocks Decline as Euro Slides on Spain Concern - Businessweek
The U.S. Treasury 10-year yield slid to a record while stocks tumbled and the euro weakened to a two- year low as Spain struggled to recapitalize its banks, concern grew about Greece’s future in the euro and American home sales declined. Italian and Spanish bonds tumbled.
Ten-year U.S. note yields lost as much as 13 basis points to 1.6153 percent. The MSCI All-Country World Index (MXWD) plunged 1.8 percent, the most since April. The Standard & Poor’s 500 Index slid 1.4 percent to close at 1,313.32 at 4 p.m. in New York. The euro sank 1.1 percent to $1.2368. The 10-year Italian yield jumped 17 basis points and Spanish 10-year rates rose to a euro- era record relative to German bunds. Two-year German yields touched zero for the first time. The S&P GSCI commodities gauge fell 2.3 percent as oil sank below $88 a barrel.
Concern about Europe’s debt crisis deepened after Italy failed to meet its maximum target at a debt sale, costs to protect Spanish government bonds with default swaps climbed to an all-time high and a Greek poll showed support for anti- austerity parties. The National Association of Realtors said the index of pending U.S. home resales dropped 5.5 percent in April from the prior month.
“You have a market that’s largely being driven by fear,” said David Coard, head of fixed-income trading in New York at Williams Capital Group, a brokerage for institutional investors. “The U.S. will continue to be the primary recipient of the safe-haven bid. People are clearly more confident in Treasuries. We still have the most liquid, capital markets.”
Treasury Yields
The 10-year Treasury yield, which is a benchmark for everything from mortgages to corporate bonds, fell in each of the nine weeks through May 18, the longest stretch since 1998. The 30-year U.S. bond yield dropped 14 basis points to 2.71 percent today, the lowest level since October. Seven-year notes reached a record low 1.05 percent.
The S&P 500 slid the most since May 17 and erased yesterday’s 1.1 percent rally as energy, financial and industrial companies led losses in all 10 main industry groups. Caterpillar Inc., Chevron Corp., Alcoa Inc., Exxon Mobil Corp. and Bank of America Corp. lost more than 2.5 percent for the biggest declines in the Dow Jones Industrial Average, which sank 160.83 points to 12,419.86.
A gauge of homebuilders in S&P indexes tumbled 4.9 percent after rallying for six straight days, its longest streak in almost a year.
Research In Motion Ltd. slid 7.1 percent to lead Canadian stocks lower as the maker of the BlackBerry smartphone forecast a surprise operating loss for the first quarter and hired banks to advise on strategic options.
European Markets
The Stoxx Europe 600 Index (SXXP) declined 1.5 percent as Spain’s IBEX 35 Index plunged 2.6 percent to a nine-year low and Italy’s FTSE MIB Index tumbled to the lowest since March 2009.
BASF SE, the world’s biggest chemical maker, declined 2 percent as Frankfurter Allgemeine Zeitung reported the company isn’t seeing the kind of dynamism it expected in Asia. BHP Billiton Ltd. and Rio Tinto Plc fell at least 2.5 percent as copper declined. Royal Dutch Shell Plc, Europe’s biggest oil company, retreated with the price of oil.
The European Central Bank rejected a Spanish plan to recapitalize the state-owned lender Bankia group, the Financial Times reported. The ECB said today it hasn’t been consulted by Spain on any plans to recapitalize a “major Spanish bank” and that it has “not expressed a position on plans by the Spanish authorities” for such a move.
The European Commission called for direct euro-area aid for troubled banks, touted common bond issuance and sided with Spain in proposing that the euro’s permanent bailout fund inject cash to banks, according to policy recommendations released today in Brussels.
Euro Weakens
The euro fell to as low as $1.2362, the weakest since July 1, 2010, and slid 1.6 percent versus the yen for its seventh consecutive decline. The shared currency weakened against 10 of 16 major peers, while the dollar strengthened against all 16 except the yen.
Most Greeks want to see the terms of an international financial rescue revised even as they acknowledge that failing to abide by them may lead to the country exiting the euro, an opinion poll showed. Seventy-seven percent of the 1,600 Greeks surveyed by GPO SA said the terms of the bailout should be revised. A VPRC opinion poll for Epikaira magazine showed that anti-austerity party Syriza had the support of 30 percent of voters, compared with 26.5 percent for New Democracy, which backs the terms of a European Union bailout.
Spanish Debt
Credit-default swaps on Spain climbed 27 basis points to a record 588, according to prices from CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments 5.6 basis points higher to a mid-price of 320.25.
Spain’s 10-year yield climbed 21 basis points to 6.66 percent, with the spread over bunds widening to as much as 541 basis points, or 5.41 percentage points, a euro-era record. The yield on the German 10-year security fell as much as 10 basis points to 1.26 percent, the lowest on record.
Spanish unemployment probably will rise above its current record level as the country grapples with budget challenges and the threat of further costly bank bailouts, the European Commission said. Spanish banks may have to set aside even more capital to brace themselves against the impact of a weaker economy, the commission, the EU’s regulatory arm, said in a staff report today.
Spain’s gross domestic product is forecast to fall 1.8 percent this year and 0.3 percent in 2013, with the strongest economic contraction in the second half of 2012. The jobless rate is projected to increase to 25.1 percent next year.
‘Need for Burden Sharing’
“Spain looks to have gotten to the point where it cannot bear the burden alone,” David Mackie, chief economist at JPMorgan Chase & Co. in London, wrote in a report. “The Spanish government recognizes the need for burden sharing, but it does not want the kind of burden sharing that was made available to Greece, Ireland and Portugal.”
Among the 24 materials tracked by the S&P GSCI index, 20 retreated, with energy commodities and cotton leading declines.
Crude for July delivery decreased 3.2 percent to $87.84 a barrel and touched a seven-month low of $87.82, the lowest settlement since Oct. 21. Prices are down 16 percent this month, the biggest drop since December 2008. A report tomorrow may show U.S. stockpiles climbed to the highest level since 1990. Brent crude dropped below $105 a barrel in London for the first time this year. Copper slipped 2.1 percent to $3.39 a pound in New York, its lowest settlement price of the year.
The MSCI Emerging Markets Index (MXEF) slid 1.7 percent as benchmark gauges in Russia, Hungary, Taiwan and Thailand fell more than 1 percent. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong dropped 1.7 percent after Xinhua News Agency said yesterday that China has no plans to introduce stimulus measures on the scale seen during the global financial crisis. India’s Sensex Index declined as Tata Motors Ltd. (TTMT), the country’s largest automaker, sank 12 percent after its main Jaguar Land Rover unit posted earnings that missed analysts’ estimates.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Susanne Walker in New York at swalker33@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
World stocks dive after Europe elections, US data - Yahoo Finance
BANGKOK (AP) -- World stock markets were pummeled Monday by election results in Greece and France that heightened uncertainty about Europe's ability to solve its debt crisis.
Signs of a faltering economic recovery in the U.S. compounded the dour mood while oil slid to nearly $97 a barrel.
Japan's Nikkei 225 index plunged 2.8 percent to close at 9,119.14 — its lowest finish in three months — with the market's export sector also sapped by a rising yen. Hong Kong's Hang Seng slid 2.6 percent to 20,536.59.
Futures augured losses for Wall Street. Dow Jones industrial futures fell 0.8 percent to 12,857 and S&P 500 futures lost 0.9 percent to 1,350.90. Among European markets, Germany's DAX dropped 1.5 percent to 6,463.67 and France's CAC-40 shed 1.6 percent to 3,112.49. Britain's markets were closed for a public holiday.
Weekend election results in Greece sent tremors throughout Europe as voters punished the parties responsible for highly unpopular austerity measures instituted to prevent the country from defaulting on its massive debts and exiting the euro currency bloc.
No political party won enough votes to form a government, raising the possibility of new elections within months and protracted uncertainty for global markets.
Meanwhile, in France, President Nicolas Sarkozy lost to Socialist candidate Francois Hollande, who had criticized the country's austerity program and wants to boost government spending.
Francis Lun, managing director of Lyncean Holdings in Hong Kong, said markets were overreacting to fears Hollande would make good on a campaign pledge to renegotiate an agreement signed by Sarkozy to put the brakes on government overspending.
"Even though Hollande indicated he will repudiate Sarkozy's agreement with the European Union, in reality he cannot do it," Lun said. "It is understood that a new government cannot repudiate or renegotiate a treaty signed by the previous government."
Yet much could depend on French parliamentary elections next month. If there is a continued backlash against austerity policies, Hollande would face additional pressure to boost spending sharply. That could lead to further downgrades of France's credit rating and kick off a fresh wave of crisis fears, destabilizing global markets.
In other Asia markets, Australia's S&P/ASX 200 lost 2.2 percent to 4,301.30 and South Korea's Kospi shed 1.6 percent to 1,956.44.
On Friday, U.S. stocks plunged after the government reported that hiring slowed sharply in April.
A report from the Labor Department Friday showing that U.S. jobs growth slumped in April for a second straight month. The 115,000 jobs added in April and the 154,000 in March were down form an average of 252,000 a month from December through February.
Energy stocks were among the hardest hit after the price of oil lost about 8 percent over three trading days.
Hong Kong-listed China National Offshore Oil Corp., or CNOOC, tumbled 4.8 percent. Japanese energy explorer Inpex Corp. lost 5.3 percent. South Korea's S-Oil Corp. fell 4.4 percent.
Financial shares sank amid all the uncertainty. Japan's Nomura Holdings Inc. plunged 7.4 percent while ICICI Bank Ltd., India's largest private lender, lost 1.9 percent. Hong Kong-listed Bank of China Ltd. lost 2.6 percent.
Australian resources stocks also fell sharply. BHP Billiton, the world's No. 1 mining company, dropped 4.1 percent. Uranium miner Energy Resources of Australia sank 7.4 percent and its rival, Paladin Energy Ltd., dived 6.8 percent.
Major Japanese exporters deteriorated as the yen strengthened. Yamaha Motor Corp. toppled 6.8 percent while Honda Motor Corp. fell 5.6 percent. Sony Corp. lost 4.5 percent.
Benchmark oil for June delivery was down $1.18 to $97.31 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $4.05 to settle at $98.49 in New York on Friday.
In currencies, the euro fell to $1.3017 from $1.3089 late Friday in New York. The dollar fell to 79.83 from 79.87 yen.
___
Follow Pamela Sampson on Twitter at http://twitter.com/pamelasampson
Romney Clinches GOP, Raises Money With Trump - digtriad.com
(CBS News) WASHINGTON - The Republican presidential race is over.
Mitt Romney won the Texas primary Tuesday, picking up enough delegates to clinch the nomination.
CBS News estimates Romney now has 1,198 GOP delegates.
Romney didn't go to Texas Tuesday night to celebrate.
He was raising big money with Donald Trump in Las Vegas.
Everything about Trump is big, including the money he can raise for political campaigns.
The question for Romney is whether Trump can also cause some big headaches with his big mouth.
Tuesday night in Las Vegas, Romney kept his focus on President Obama and the economy.
"He's been a big disappointment, hasn't he?" Romney asked a crowd.
"Yeah!" the crowd shouted.
The former Massachusetts governor was in the swing state of Nevada attending a $2 million fundraiser hosted by Trump, who's been raising money and bringing his celebrity to Romney's campaign.
But if raising money is what Trump does best, he's also good at stirring up controversy.
And so on Romney's day, there was the billionaire big-talker continuing to question, in a phone interview with CNN's Wolf Blitzer, whether Mr. Obama was born in the U.S.
"A lot of people do not think it was an authentic (birth) certificate (the president released)," Trump told Blitzer.
"How could you say that if the state..." Blitzer began to ask.
" ... A lot of people do not think it was authentic," Trump insisted.
It was Trump's questions last year that prompted Mr. Obama to release his full birth certificate, which the state of Hawaii recently gave its seal of approval.
Romney has said he believes the president was born in America, but he's hasn't disavowed Trump, saying he and his supporters aren't going to agree on everything.
And at Tuesday night's fundraiser, Newt Gingrich, a former rival-turned-new-supporter, came to Romney's defense, saying, "Governor Romney's not distracted. The Republican party's not distracted. We believe that this is an American-born job-killing president; other people may believe that he was born somewhere else and still kills jobs."
Also Tuesday night, Romney got a personal introduction by Gingrich to mega-donor Sheldon Adelson who, with his wife, gave $20 million to Gingrich - the kind of money the Romney campaign could certainly use going head-to-head with the deep pockets of the Obama camp.
Stocks Drop 1%, Dow Falls 150; Vix Soars 10% - CNBC
Stocks finished sharply lower Wednesday, wiping out all of the previous session's gains, as growing worries over rising bond yields in Spain and Italy and fears over Greece's possible euro zone exit kept investors on edge.
Facebook [FB Loading... () ] took another leg lower, with the stock finishing near $28 a share. The stock has plunged nearly 25 percent since its market debut almost two weeks ago. The social-networking giant received notice that U.S. antitrust regulators will give its proposed purchase of Instagram a lengthy investigation.
The Dow Jones Industrial Average tumbled 160.83 points, or 1.28 percent, to close at 12,419.86, led by Alcoa [AA Loading... () ] and BofA [BAC Loading... () ]. The blue-chip index is less than 2 percent from erasing all of this year's gains.
The S&P 500 fell 19.10 points, or 1.43 percent, to end at 1,313.32. The Nasdaq dropped 33.63 points, or 1.17 percent, to finish at 2,837.36.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, surged nearly 15 percent to finish above 24.
All 10 S&P sectors closed lower, led by energy and financials.
“There’s certainly no panic—the S&P bounced at 1,311, which is right where we’re supposed to bounce,” said Stephen Gilfoyle, trader at Meridan Equity Partners. “We’re going into two very heavy macro days in the U.S. where the focus could shift to domestic [reports]—the GDP and non-farm payrolls.”
Non-farm payrolls are expected to show a gain of 150,000 in May, according to a Reuters poll, after a small gain of 115,000 new jobs in April, the fewest in six months.
On the economic front, pending home sales dropped 5.5. percent in April to a four-month low, according to the National Association of Realtors. Economists polled by Reuters had expected a gain of 0.1 percent, after a previously reported 4.1 percent gain.
Meanwhile, the European Commission said the euro zone must move towards a banking union, issue eurobonds and boost growth while cutting debt. (Read More: 'Spexit' Will Come Before a 'Grexit': Analyst)
European shares finished sharply lower and the euro touched a 23-month low against the U.S. greenback as investors worried that Spain's banking problems would push its borrowing costs near highs not seen since last November. And worries over Italy's borrowing costs also raised alarm, pushing the Italian 10-year bond above 6 percent.
“There isn’t a quick fix for this…we’re in a very strong downtrend,” said Andy Busch, global market strategist of BMO Capital Markets. “The very important decision that has to be made on fiscal integration, whether countries are going to give up their sovereignty—that’s highly questionable at this point so you continue to see the euro make new lows and dollar strengthen.”
Apple [AAPL Loading... () ] CEO Tim Cook said technology for televisions was of "intense interest" but stressed the company's efforts would unfold gradually, amid speculation the iPad and iPhone maker was on the brink of unveiling a revolutionary iTV.
Meanwhile, Research In Motion [RIMM Loading... () ] plunged almost 10 percent after the troubled BlackBerry maker said it hired bankers for a strategic review and to look for partnerships as the company warned it would likely report an operating loss in the first quarter. In addition, at least nine brokerages slashed their price target on the firm.
Pep Boys [PEP Loading... () ] plunged after the automotive parts and service chain
Stanley Black & Decker [SWK Loading... () ] is among potential bidders for private equity-owned Infastech, a Singapore-based industrial fastener maker with revenues of more than $500 million, sources with direct knowledge of the matter said.
Wynn [WYNN Loading... () ] shares rose after Goldman Sachs upgraded the gaming resort company from "neutral" to "buy."
Also on the economic front, mortgage applications fell last week even as rates hit another record low, according to the Mortgage Bankers Association.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
THURSDAY: Challenger job-cut report, ADP employment report, GDP, jobless claims, Fed's Pianalto speaks, corporate profits, Chicago PMI, oil inventories, chain-store sales, Zipcar shareholders mtg; Earnings from Joy Global
FRIDAY: Non-farm payrolls, personal income & outlays, ISM mfg index, construction spending, auto sales, Wal-Mart shareholders mtg
More From CNBC.com:
Money Man Pulls Even With Black Guy In Latest Poll - The Onion (satire)
WASHINGTON—With the election less than six months away, a nationwide Gallup poll released Wednesday found that Money Man has now pulled even with Black Guy in the 2012 presidential race.
Citing Money Man's significant appeal among veterans—as well as his narrow lead in Florida, a crucial swing state that went to Black Guy in 2008—experts said Money Man is closing the gap on a race that, until quite recently, seemed to be firmly under Black Guy's control.
"I have to say, Money Man has really impressed me lately," said poll respondent Mike Hargett, who is among the 45 percent of independent voters planning to cast a ballot for Money Man in November. "I voted for Black Guy in the last election, but I’ve been fairly disappointed with the job he’s done. As much as I admire Black Guy and his historic achievement, it just seems like the time is right for someone new with fresh ideas to come in and shake things up a bit."
"Someone like Money Man," Hargett added.
Still, Money Man’s current one-point lead over Black Guy is within the Gallup poll’s margin of error, and Washington insiders have pointed to several encouraging signs for Black Guy, who maintains strong ratings on foreign policy and a double-digit lead in favorability among middle-class voters—two areas in which Money Man typically hasn’t polled very well.
Further highlighting the closeness of the race, the poll revealed there are a significant number of undecided voters still weighing the merits of a Money Man presidency vs. a Black Guy presidency.
"It's a tough choice, because both Money Man and Black Guy have strong qualities," said 47-year-old voter Albert Dorin, adding that he may not make up his mind until he sees Money Man and Black Guy next to each other on a stage, debating. "I like Money Man’s views on the economy and on money. However, you have to hand it to Black Guy for finally tracking down and killing bin Laden. And I like his wife, Black Lady, too."
"I like her more than Money Man’s wife, Blonde Lady," Dorin added.
Despite Money Man's rise in the polls, surveys have found that a majority of Republican voters would have preferred to see Food Man from New Jersey on the ballot, had he chosen to run, and that there also would have been strong support for The Woman, especially among the conservative base.
"Food Man from New Jersey or The Woman would have been more in line with my sensibilities, but there's still a good chance Money Man will pick one of the two as his running mate," Ohio voter Margaret Yaster told reporters. "Besides, for me, pretty much any Republican would be better than Black Guy. Even Pizza Black Guy."
"Not Ron Paul, though," Yaster continued. "That guy's out of his goddamn mind."
Stocks: Europe worries stalk Wall Street; Dow loses 161 - Tulsa World
Stocks are closing sharply lower amid fear that Europe's debt crisis might fracture the financial system there.
Strong demand for safe investments Wednesday pushed the yield on the 10-year Treasury note to its lowest level since World War II.
Spain's borrowing costs spiked to the highest level since Spain joined the euro currency. Last week, the nation's fourth-largest lender said it needed nearly $24 billion in government aid.
Greece's future in the euro is uncertain ahead of elections next month.
The Dow closed down 161 points at 12,419. The S&P 500 index was down 19 at 1,313. The Nasdaq composite average was down 34 at 2,837.
About 13 stocks fell for every two that rose on the New York Stock Exchange. Trading volume was heavy at 3.47 billion shares.
Fearing a financial rupture in Europe, investors around the world fled from risk Wednesday. They punished stocks and the euro, and the yield on a benchmark U.S. bond hit its lowest point since World War II.
In the United States, where concerns about Europe have already wiped out most of this year's gains for stocks, major averages fell more than 1 percent. The Dow Jones industrial average was down as much as 184 points.
European stocks lost even more, and the euro dropped below $1.24, its lowest point since the summer of 2010.
"Everyone's just afraid that if Europe doesn't get its act together, there will be a big spillover in the U.S.," said Peter Tchir, manager of the hedge fund TF Market Advisors.
He said the uncertainty over Europe's future was reminiscent of the financial crisis in the fall of 2008, when it was briefly unclear whether banks would be bailed out and "we had these giant swings up and down."
The trigger Wednesday was Spain, where the banking system is under strain a week after its fourth-largest lender required $23.8 billion in government aid to cover souring real estate loans.
Wall Street, which woke up to increased anxiety over higher Spanish borrowing rates, was down from the opening bell.
In the final half-hour of trading, the Dow was down 163 points at 12,416. The Dow has had a miserable May, losing more than 6 percent, and is on track for its first losing month since September.
The Standard & Poor's 500 index lost 20 points to 1,312. The Nasdaq composite index fell 36 to 2,834.
Investors are increasingly worried that problems at the bank, Bankia, might recur at other Spanish banks. Many lent heavily during the nation's real estate bubble. Losses from the real estate crash might be too big for Spain's government to shoulder.
Spain has enacted harsh government spending cuts to bring its budget deficit within strict new European guidelines. But the country is in a recession and has 25 percent unemployment, and might need a bailout, like Greece, Ireland and Portugal.
On Wednesday, borrowing rates rose sharply for Spain and Italy, both seen as the next problem cases in a debt crisis that has rocked Europe for more than two years. Traders dumped bonds issued by those governments.
The yield on Spain's 10-year bonds, a key indicator of market confidence in a country's ability to pay down its debt, shot as high as 6.69 percent, the highest since the euro currency was launched in 2002.
Intense demand for low-risk, easily tradable securities led investors to buy U.S. government debt. The yield on the 10-year Treasury note to 1.62 percent, a big decline from 1.74 percent late Tuesday.
That appeared to be the lowest since 1945, said Bill O'Donnell, head of U.S. Treasury strategy at the Royal Bank of Scotland, citing data from the European Central Bank and other sources.
Federal Reserve daily records only go back to 1962, and those reflect a previous record of 1.70 percent, set May 17.
"There's just a massive flight to safe-haven assets today," O'Donnell said.
He characterized the rush into U.S. bonds by citing a well-known, unsavory analogy made by Richard Fisher, the head of the Federal Reserve's Dallas bank: "The U.S. is the prettiest horse in the glue factory."
Yields on German government bonds, also seen as safe, turned lower.
Concern about Europe lurked around every corner: The European Commission said consumer confidence fell sharply across the region last month. Spaniards withdrew money from their banks, spreading fear about that nation's ability to go on without bailouts. Spain's main stock index closed down 2.6 percent.
An opinion poll in Greece showed that the far-left Syriza party is gaining support ahead of key elections June 17. Syriza opposes the system of bailouts and sharp budget cuts that have kept Greece afloat but also gutted its economy.
If the party wins, Greece may be forced to exit the euro currency. The shock waves could reach nations that have received bailouts, like Portugal, and those that might need them, like Italy.
Until the Greek elections next month, things will be too uncertain for the market to sustain a meaningful rally, said David Kelly, chief market strategist at J.P. Morgan Funds.
If the bailouts continue and European governments start spending to spur growth, Kelly expects the market eventually to rise. If Syriza wins and Greece is expelled from the euro, he sees stormy waters for months to come.
Amid the tumult, Europe's executive branch called on the 17 countries that use the currency to create a "banking union" that can centrally oversee and, if needed, bail out national banks.
If Europe's financial crisis plunges it into a deep recession, global economic growth will likely falter, reducing demand for commodities and machines that power growth.
Fearing that outcome, traders pushed the stocks of heavy equipment maker Caterpillar and aluminum company Alcoa to among the biggest declines among the 30 companies that make up the Dow.
The euro fell as low as $1.2360, the lowest since the summer of 2010. Benchmark stock indexes closed down 2.2 percent in France, 1.8 percent in Italy and Germany.
When banks and big investors get frightened, they sell stocks or bonds and park the money in the safest government debt markets. They buy Japanese yen, German bonds and especially U.S. Treasurys.
It's no longer about turning a profit, said O'Donnell of RBS. That's why German government two-year notes are paying zero percent: People are simply handing their money over for safekeeping.
The U.S. Treasury market is still considered one of the safest places in the world to stash a billions in a hurry. At $11 trillion, no other market is as large, so there's always somebody ready to buy or sell them.
"When people just want to get their money back, there's not a lot of competition," O'Donnell said.
Food and energy commodities fell sharply. Crude oil lost more than $3 to below $88 a barrel. Crude has been falling steadily since the beginning of May, when it traded as high as $106 a barrel.
Kelly, of J. P. Morgan Funds, said investors should remember that the U.S. is on firmer economic footing than Europe, and make sure their portfolios could withstand either possible outcome.
"Things could be much better, or much worse, than the markets have priced in," Kelly said. "The only logical investment strategy is to be balanced — to get to the middle of the boat."
Among U.S. stocks making moves:
— Monsanto, the agricultural company, was one of the few big gainers in a sea of red. It jumped more than 3 percent after its CEO said this year's earnings will likely surge 25 percent, far more than Wall Street had been expecting. Sales were strong in its seed and chemicals business, including Roundup herbicides.
— Research in Motion, maker of the BlackBerry, plunged 7 percent after the company said late Tuesday it had hired a team of bankers to help it weigh its options — Wall Street jargon for a possible sale or reorganization. RIM's business has been crumbling as smartphone users move to iPhone and Android devices.
— Whirlpool rose, reversing an earlier loss, after the Department of Commerce ruled that the South Korean government provided illegal subsidies to producers of clothes washers that sold their products in the U.S. The stock gained 1.5 percent to $63.73.
Stocks Drop 1%, Dow Falls 150; Facebook Gains - CNBC
Stocks finished sharply lower Wednesday, wiping out all of the previous session's gains, as growing worries over rising bond yields in Spain and Italy and fears over Greece's possible euro zone exit kept investors on edge.
Facebook [FB Loading... () ] took another leg lower, with the stock finishing near $28 a share. The stock has plunged nearly 25 percent since its market debut almost two weeks ago. The social-networking giant received notice that U.S. antitrust regulators will give its proposed purchase of Instagram a lengthy investigation.
The Dow Jones Industrial Average tumbled 160.83 points, or 1.28 percent, to close at 12,419.86, led by Alcoa [AA Loading... () ] and BofA [BAC Loading... () ]. The blue-chip index is less than 2 percent from erasing all of this year's gains.
The S&P 500 fell 19.10 points, or 1.43 percent, to end at 1,313.32. The Nasdaq dropped 33.63 points, or 1.17 percent, to finish at 2,837.36.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, surged nearly 15 percent to finish above 24.
All 10 S&P sectors closed lower, led by energy and financials.
“There’s certainly no panic—the S&P bounced at 1,311, which is right where we’re supposed to bounce,” said Stephen Gilfoyle, trader at Meridan Equity Partners. “We’re going into two very heavy macro days in the U.S. where the focus could shift to domestic [reports]—the GDP and non-farm payrolls.”
Non-farm payrolls are expected to show a gain of 150,000 in May, according to a Reuters poll, after a small gain of 115,000 new jobs in April, the fewest in six months.
On the economic front, pending home sales dropped 5.5. percent in April to a four-month low, according to the National Association of Realtors. Economists polled by Reuters had expected a gain of 0.1 percent, after a previously reported 4.1 percent gain.
Meanwhile, the European Commission said the euro zone must move towards a banking union, issue eurobonds and boost growth while cutting debt. (Read More: 'Spexit' Will Come Before a 'Grexit': Analyst)
European shares finished sharply lower and the euro touched a 23-month low against the U.S. greenback as investors worried that Spain's banking problems would push its borrowing costs near highs not seen since last November. And worries over Italy's borrowing costs also raised alarm, pushing the Italian 10-year bond above 6 percent.
“There isn’t a quick fix for this…we’re in a very strong downtrend,” said Andy Busch, global market strategist of BMO Capital Markets. “The very important decision that has to be made on fiscal integration, whether countries are going to give up their sovereignty—that’s highly questionable at this point so you continue to see the euro make new lows and dollar strengthen.”
Apple [AAPL Loading... () ] CEO Tim Cook said technology for televisions was of "intense interest" but stressed the company's efforts would unfold gradually, amid speculation the iPad and iPhone maker was on the brink of unveiling a revolutionary iTV.
Meanwhile, Research In Motion [RIMM Loading... () ] plunged almost 10 percent after the troubled BlackBerry maker said it hired bankers for a strategic review and to look for partnerships as the company warned it would likely report an operating loss in the first quarter. In addition, at least nine brokerages slashed their price target on the firm.
Pep Boys [PEP Loading... () ] plunged after the automotive parts and service chain
Stanley Black & Decker [SWK Loading... () ] is among potential bidders for private equity-owned Infastech, a Singapore-based industrial fastener maker with revenues of more than $500 million, sources with direct knowledge of the matter said.
Wynn [WYNN Loading... () ] shares rose after Goldman Sachs upgraded the gaming resort company from "neutral" to "buy."
Also on the economic front, mortgage applications fell last week even as rates hit another record low, according to the Mortgage Bankers Association.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
THURSDAY: Challenger job-cut report, ADP employment report, GDP, jobless claims, Fed's Pianalto speaks, corporate profits, Chicago PMI, oil inventories, chain-store sales, Zipcar shareholders mtg; Earnings from Joy Global
FRIDAY: Non-farm payrolls, personal income & outlays, ISM mfg index, construction spending, auto sales, Wal-Mart shareholders mtg
More From CNBC.com:
World stocks mixed amid bargain-hunting vs caution - Yahoo Finance
BANGKOK (AP) -- Asian stocks eked out gains Thursday as traders hunted for bargains after sharp selling in recent days, but markets in Europe fell amid intensifying fears of a messy exit by Greece from the euro common currency.
Greece called a new round of elections for June 17 after coalition talks to form a government fell apart. The president said depositors were pulling hundreds of millions of euros out of banks, weakening the country's strained financial system.
The developments fueled fears that Greece would exit the euro currency and shake global markets. In elections earlier this month, Greek voters punished parties that supported tough austerity measures needed to secure international bailout money.
But analysts at Credit Agricole CIB in Hong Kong said the scheduling of new Greek elections suggested "a reduction in near-term uncertainties" that could lead to some relief for volatile markets.
Britain's FTSE 100 fell 0.4 percent to 5,380.72 in early trading. Germany's DAX fell 0.2 percent to 6,373.01 and France's CAC-40 lost 0.2 percent to 3,042.45.
U.S. stocks were set for a moderately higher opening, with Dow Jones industrial futures up 0.3 percent at 12,610. S&P 500 futures rose 0.4 percent to 1,327.
In Asia, stock markets enjoyed a slight rebound as investors went bargain-hunting, analysts said.
Japan's Nikkei 225 climbed 0.9 percent to close at 8,876.59 after the country posted better-than-expected growth figures for the first quarter. South Korea's Kospi added 0.3 percent to 1,845.24. Benchmarks in Taiwan, New Zealand and the Philippines also rose.
Australia's S&P/ASX 200 slipped 0.2 percent to 4,157.40, dragged down by financial stocks. Hong Kong's Hang Seng closed 0.3 percent down at 19,200.93.
Mainland Chinese shares bounced back from early losses, buoyed by calls from the country's central bank governor, Zhou Xiaochuan, for market reforms.
The benchmark Shanghai Composite Index rose 1.4 percent to 2,378.89. The Shenzhen Composite Index also gained 1.4 percent to 954.95. Shares in brokerages, financial and trading-related companies led the gains.
Positive news on the U.S. economy on Wednesday underpinned sentiment in Asia. Construction of homes in April rose 2.6 percent from March, and U.S. factory production increased 0.6 percent in April, helped by a gain in auto production.
Some Japanese stocks saw big gains amid news that the country's economy grew at an annualized 4.1 percent for the January-March quarter thanks to a rebound in consumer spending.
Sharp Corp. jumped 5.7 percent and Mazda Motor Corp. added 3.8 percent. Steel company JFE Holdings shot up 5.5 percent.
Benchmark oil for June delivery was up 52 cents to $93.33 per barrel in electronic trading on the New York Mercantile Exchange. On Wednesday, the contract fell by $1.17 to finish at a seven-month low of $92.81 per barrel in New York.
In currencies, the euro fell to $1.2715 from $1.2725 late Wednesday in New York. The dollar rose to 80.35 yen from 80.29 yen.
___
AP researcher Fu Ting contributed from Shanghai.
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