Safe-haven investments including Treasurys, gold and the U.S. dollar all rallied while U.S. stocks dropped amid renewed concern that the €110 billion ($143 billion) aid package to Greece won't be enough to prevent the crisis from spreading to other euro-zone countries. Concern has also set in about the Greek government's ability to carry out austerity measures required by the aid package.
The Dow Jones Industrial Average tumbled more than 220 points, or 2%, to 10928, erasing all of Monday's 143-point rise. The Nasdaq Composite fell nearly 3%, while the Standard & Poor's 500 index declined 2.1% falling beneath 1200.
The decline in stocks prompted a spike in the Chicago Board Options Exchange's volatility index, or VIX. After closing Monday at 20.19, the market's so-called fear index jumped more than 17% to reach an intraday high of 23.67. That marks its highest level since Feb. 12.
"We have continued weakness that is greater than expected and lasting longer than expected, raising the specter of a long-lasting multi-country bail-out," said Peter Tuz, president of Chase Investment Counsel. He said that fear raised worries that the instability could eventually weaken U.S. equities. "You don't have weakness in one big market without its spreading to other markets."
Worries intensified as U.K. investors returned from the May Day holiday, sending global stocks lower. Markets in Spain, Greece and Italy were off anywhere from 3% to 7%, while the cost of protecting sovereign debt of Spain, Italy and Portugal against default jumped. The euro resumed its recent slide, hitting a 12-month low of $1.3037 and raising the prospect of a slide towards $1.25, analyst said.
WSJ On-Line
That must have been yesterday’s report. Gold went nowhere but down from the opening bell.