Stocks Plummet Amid U.S., Euro Debt Fears
NEW YORK (TheStreet) -- Europe's exposure to Italian debt had investors fearing that more countries will be dragged into a fiscal crisis as a lack of clear direction from the European Union upset stock markets worldwide on Monday.
European officials have yet to show a coherent strategy with how to deal with the debt situation, said Lee Cohen, head of government trading and finance at Oppenheimer. Uncertainty over budget issues worldwide has meant that a global financial crisis stands between simmering and boiling, said Cohen.
On Monday, U.S. stocks lost more than 1%, with the Dow falling 1.2% to 12,505. The S&P 500 lost 2% to 1320, and the Nasdaq finished 2% lower at 2803.
The market followed overseas indices lower, with the FTSE in London finishing down 1%, and the DAX in Frankfurt plunging 2.3%. Hong Kong's Hang Seng sunk 1.7%, and Japan's Nikkei lost 0.7%. European leaders met to discuss additional financial support for Greece, but market watchers were already eyeing Italy and Spain as the next eurozone countries in need of bailouts. Italian and Spanish bond yields rose to their highest levels on Monday since the creation of the euro, according to a Wall Street Journal report. The euro settled 1.6% lower against the greenback, which traded 1% higher against a basket of currencies. News from China also worried investors as data released Saturday showed that inflation in the country had risen to a three-year high in June despite repeated attempts by China's central bank to rein in an overheated economy. Meanwhile,U.S. debt talks are still in progress, with President Obama vowing this morning to meet with legislators every day to come to an agreement on reducing the deficit. The equity market by large has not reflected fears that analysts could downgrade the country's credit rating, as most investors believe the U.S. will come to a resolution ahead of the Aug 2 deadline to raise the debt ceiling. Kicking off the earnings season, Alcoa (AA) reported earnings of 32 cents per share, about in line with analysts' estimations. The company's stock gained 0.5% in afterhours trading.
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