Market sell-off continues as Europe woes persist

09:07, May 20, 2010      

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U.S. equity market experienced a second-day of big sell-off on Wednesday as investors continued to focus on Europe economic woes.

All three major indexes ended a choppy session more than 0.5 percent lower. The Dow Jones industrial average plunged 66.58, or 0.63 percent, to 10,444.37. The Standard & Poor's 500 index fell 5. 75, or 0.51 percent, to 1,115.05 and the Nasdaq plummeted 18.89, or 0.82 percent, to 2,298.37.

Investors have been focusing on situation in Europe, and the extent of worry is clear as even a rising euro failed to boost the market on Wednesday.

Germany announced late Tuesday that it would ban naked short- selling in the country's ten leading financial institutions. The ban, which took effect Wednesday and will last until March 31, 2011, would also apply to naked short-selling of credit-default swaps and euro-zone government bonds.

Germany enacted the ban in an effort to try to prevent its markets from falling sharply in response to concerns about Europe' s debt problems, but global stock markets seemed to be rattled by the strict measures as investors doubted the real situation might be worse than expected in Europe.

In the United States, an overhaul bill of financial regulation is expected to get approved as early as later this week.

Ongoing campaign for tighter regulation on financial industry has also brought downward pressure on equity market.

Adding to the negative tone, the Mortgage Bankers Association said on Wednesday that the number of homeowners who missed at least one payment on their mortgage rose to a record in the first quarter, a sign that foreclosure could continue to rise. Minutes from the Federal Reserve's last meeting showed that Fed officials were more upbeat about the prospects of the U.S. economy than beginning of this year. But investors largely ignored the report as the meeting was held before the European debt problems rattled the market.

In economic data front, the Commerce Department reported that inflation at consumer level increased by 0.1 percent in April, in line with economists' average forecasts.



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