Stocks plummet as investors follow Italian vote
NEW YORK — Stocks sustained the worst drop in more than three months as the prospect of political paralysis in Italy raised the specter of Europe's debt crisis flaring up again.
The Dow Jones industrial average fell 216.40 points, or 1.6 percent, to 13,784.17, its biggest drop since Nov. 7.
The Standard & Poor's 500 index fell 27.75 points, or 1.8 percent, to 1,487.85, dropping below 1,500 for the first time in three weeks. The Nasdaq composite dropped 45.57 points, or 1.4 percent, to 3,116.25. Stocks rallied in the early going as exit polls showed that a center-left coalition in Italy favoring economic reforms in the euro region's third-largest economy was leading. A later poll predicted that the elections could result in a stalemate in the country's legislature, and market gains evaporated. The losses accelerated in the late afternoon as partial official results showed an upstart protest campaign led by a comedian making stunning inroads.
“There was confidence in this election and, obviously, confidence imploded,” said Ben Schwartz, a market strategist at Lightspeed Financial.
Investors dumped Italian government bonds, sending their yields higher, and erased most of an early rally in Italy's stock market. The yield on Italy's 10-year government bond shot up to 4.43 percent from 4.12 percent early in the day, a sign that investors' confidence in the government was dimming quickly. The country's benchmark stock index, the FSTE MIB, rose 0.7 percent, giving up an early gain of 4 percent.
Investors worry about the outcome of the election because it could set off another crisis of confidence in the region's shared currency, the euro. Financial markets in Europe and the United States have swooned at the prospect of Italy or Spain being dragged into the region's government debt troubles.
, which have led to bailouts of Greece, Ireland and Portugal and severe disruptions in financial markets.
As stocks plunged, gauges of market sentiment indicated that investors were becoming more risk-averse and parking their money in defensive assets. The yield on the 10-year Treasury note, which is widely considered an ultra-safe investment, fell sharply as investors plowed money into U.S. government bonds. The yield fell to 1.88 percent from 1.96 percent late Friday.
The VIX index, a measure of how volatile investors expect the stock market to be, surged 34 percent to 19, the biggest one-day move since August 2011.
On the New York Stock Exchange, Barnes & Noble rose $1.55, or 12 percent, to $15.06 after founder and chairman Leonard Riggio told the bookseller he is going to try to buy the company's retail business. Hertz advanced 31 cents, or 1.7 percent, to $19.04, despite posting a fourth-quarter loss, after the rental car company said that its pricing improved, volume rose and it cut costs.
The Standard & Poor's 500 had its first weekly decline of the year last week. Investors sent stocks plunging after minutes from the Federal Reserve's latest policy meeting revealed disagreement over how long to keep buying bonds in an effort to boost the economy.
Fed Chairman Ben Bernanke will testify before the Senate's banking committee Tuesday and before Congress on Wednesday. Investors will watch to see if he gives any indications about how long the central bank intends to keep providing stimulus to the economy.
Many analysts say the Fed's bond-buying program and the resulting low interest rates have been a big driver behind this year's stock rally. The Dow has gained 6.3 percent this year and the S&P 500 5.6 percent, pushing both near record levels. The Dow's record close is 14,164, reaching in October 2007 and the S&P closed as high as 1,565 in the same month.
European stocks advanced, but gave back much of their early gains. Benchmark indexes rose 0.4 percent in France, 1.5 percent in Germany and 0.8 percent in Spain. Britain's index was up just 0.3 percent after Moody's stripped the country late Friday of its triple-A credit rating.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Trib 30 stocks drop to four-month low
- PPG submits offer for French sealants, adhesives business unit
- Natural gas industry buys share of Super Bowl spotlight
- Wall Street closes January on down note; Dow sheds 251 points
- Consumer comes to the rescue as companies step back
- Phelan: Fuel-saving tips for winter driving
- Obama seeks $215M for precision medicine initiative
- Consol Energy posts $74M profit in fourth quarter
- BNY Mellon expands role for treasury exec
- Kennametal plans plant closings, job cuts in fallout from oil and gas decline
- Subaru BRZ still needs upgrades