Dow Jones sinks 376 points on rising worries

08:46, May 21, 2010      

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U.S. stocks took their deepest plunge in more than a year Thursday as fears grew that Europe's debt crisis could spread and undermine the U.S. economic recovery.

The possibility has been brewing for weeks, but analysts said some investors are just waking up to it.
The Dow Jones industrial average fell 376 points, its biggest point drop since February 2009. All the major indexes were down well over 3 percent and are now showing losses for 2010.

Interest rates fell sharply in the Treasury market as investors once again sought the safety of U.S. government debt.

The number of people applying for unemployment benefits last week rose unexpectedly and the Greek government's response to its debt crisis sparked new protests in Athens.

More investors seemed to be grasping the possibility that the U.S. recovery could be in jeopardy, and that many were realizing that the stock market's big rebound since March 2009 may not have been justified.

Investors are concerned that the debt problems in countries like Greece and Portugal will spill over to other countries in Europe, cause a cascade of losses for big banks and in turn halt economic recovery in the U.S. and elsewhere.

"It's starting to look like one of these tragic stories were one person falls through the ice, then everyone else rushes in to help and ends up drowning," independent market analyst Edward Yardeni said.

They're also worried that China might take steps that will limit its economic growth, which would also affect the U.S. exports.

Analysts said traders were retreating from any investment thought to be too dangerous to own. That has meant heavy selling in stocks, commodities and troubled currencies like the euro.

Investors appear increasingly convinced that European countries will need to adopt stringent spending cuts to pay down their heavy debt loads. Such cuts would likely lead to long economic slumps for those countries, a prospect that investors may now be accepting as reality as they sell stocks and the euro.

The Dow has fallen 1,137 points, or 10.2 percent, since hitting its 2010 high on April 26.

People's Daily Online / Agencies

(Editor:赵晨雁)

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