Stocks Fall as Eurozone Sentiment Falters
NEW YORK (TheStreet) -- Stocks were falling Wednesday as investors eyed high borrowing costs in the eurozone, rising oil prices and fresh warnings about the debt crisis from policymakers worldwide.
The Dow Jones Industrial Average was down 104 points, or 0.9%, to 11,992. The index, which was up three of the last four trading sessions, tacked on 17 points in the prior session amid light trading volumes.
The S&P 500 was down 10 points, or 0.8%, at 1248. The Nasdaq was off 19 points, or 0.7%, at 2667.
With the European Central Bank still refusing to act as a lender of last resort, contagion in Europe's bond market threatens to engulf the eurozone's largest economies. According to reports, the European Central Bank stepped in Wednesday in an attempt to stop a selloff in European sovereign debt. Yields on Italian 10-year bonds eased below 7% after topping the key threshold earlier. However, the bank's intervention is known only to provide short-term stability for the market.Borrowing costs in France and Spain have been rising, making investors nervous that the debt crisis is entering a new, more dire stage, and that France may lose its pristine triple A credit rating. A downgrade of France would further erode the market's confidence in Europe's emergency rescue fund. Meanwhile, German Chancellor Angela Merkel reiterated on Wednesday that Germany will resist pressure for the central bank to take a bigger role in stemming the debt crisis. Also weighing down sentiment was a grim outlook for economic growth in the U.K. from the Bank of England. Bank of England Governor Mervyn King said Britain's economy could remain flat until mid-2012 and that he did not know how Europe would resolve its debt crisis. Bank of Japan Governor Masaaki Shirakawa said that Europe's woes are affecting emerging nations, and Japan. Signs that Italy is taking its debt problems more seriously did not stem any of the bleeding. Italy's Mario Monti formed a new government on Wednesday, bringing the country closer to staving off a potential default. However, investors are hoping that Italy will show further political willpower than a shift in its leadership. Better than expected economic data out of the U.S. were largely ignored. Industrial production rose 0.7% in October, according to the Federal Reserve. The reading was better than the 0.4% increase analysts expected, although the previous month's production figure was revised from a 0.2% gain to a 0.1% decline. Capacity utilization came in at 77.8%, slightly higher than forecast and up from 77.4% in the prior month. Confidence amongst U.S. home builders rose in November, according to the National Association of Home Builders' housing market index, which rose to a level of 20 in November. The reading, although still low, was the best since May of 2010 and surpassed the consensus forecast for the level to stick at 18. The consumer price index edged down 0.1% in October, a welcome surprise given that economists expected the level to sit tight after increasing 0.3% in September. Excluding food and energy, inflation rose 0.1%, in line with expectations.
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