Dow Falls 225 Points on Eurozone Concerns

NEW YORK ( TheStreet) -- Traders, wracked with fear that Greece's sovereign debt woes could spread to neighboring nations, sent stocks tumbling hard Tuesday, pushing the dollar to new highs against the euro and sending blue-chip stocks plunging over 200 points.

The Dow Jones Industrial Average saw 225 points, or 2%, evaporate during one of its most downbeat sessions of the year, ultimately finishing at 10,927. The S&P 500 lost 29 points, or 2.4%, to 1174, and the Nasdaq declined by nearly 75 points, or 3%, to finish at 2424.

"The strong dollar is biting into risk appetite with the euro plunging this morning on contagion fears about sovereign debt problems in Europe," said Peter Cardillo, chief market economist at Avalon Partners. "We had some good economic numbers out today, which is basically helping the market to stabilize at the low end of the range.

"There's a lot of volatility, and I suspect that this is going to continue as long as we have this fear factor of the sovereign debt worsening," Cardillo said. "The good news is that the market seems to be trading in a volatile range, but it's not breaking down, so it's a good indication that we're probably headed higher before we're headed lower."

Global markets were roiling with doubt that Greece's rescue package would be enough to ease contagion fears, and the euro slumped to new lows against the dollar.

The Chicago Board Options Exchange Volatility Index, thought of as a barometer of fear in the market, also reentered the commentary today, jumping over 24% at one point.

"We're coming off of the 15 level, which is the lowest we've been in a long time. What happened in the last week is the ranges of where it's been have broadened out dramatically," said Marc Pado, U.S. market strategist at Cantor Fitzgerald, noting the VIX is confirming his theory of dwindling conviction and a correction heading into a seasonal summer slowdown.

"This is the beginning of a more substantial correction down the road. This is wave one," he added, saying he expects the S&P to pull back to 1150 in the near term, or around January's peak level. "But we still expect a wave two during the late summer or early fall."

Overseas, Hong Kong's Hang Seng lost 0.2% while Japan's Nikkei was closed for a holiday. The FTSE in London gave up 2.6%, and the DAX in Frankfurt also shed 2.6%.

Late Monday, agents of the Federal Bureau of Investigation and detectives of the New York City Police Department arrested Faisal Shahzad in relation to the failed car bomb found in New York City's Times Square on May 1. Shahzad had been trying to get on a flight to Dubai when he was taken into custody.

The Economy

Stocks appeared to shrug off some better than expected economic figures in the morning.

March factory orders grew 1.3%, according to a report from the U.S. Commerce Department. Economists had been expecting a decline of 0.2%.

Pending home sales surged by a higher-than-expected 5.3% in March, according to the National Association of Realtors Pending Home Sales Index, which extends the prior month's growth of 8.3%. Economists had been projecting an increase of 5%.
Home Sales

The Senators will begin casting votes on financial regulatory reform legislation today, with The Hill's On the Money blog reporting that Senate Majority Leader Harry Reid (D. Nev.) expects final approval of the measure by next week. Earlier, Treasury Secretary Timothy Geithner said he has no qualms with a bank tax that could raise as much as $90 billion in the next 10 years, The Associated Press reported.

The American Petroleum Institute said inventories jumped by 2.95 million barrels last week, according to Bloomberg. Analysts polled by Platts expected a build of 1.54 million barrels to crude oil stockpiles. Investors will get another read on inventory data, this time from the Energy information Administration, Wednesday morning.

Company News

After the closing bell, InterMune ( ITMN) shares collapsed over 80% after the FDA decided not to approve a drug used to treat idiopathic pulmonary fibrosis, though regulators requested another clinical trial.

During the regular session, Alcoa ( AA), Caterpillar ( CAT) and Hewlett-Packard ( HPQ) were the Dow's biggest laggards.

But better-than-expected earnings from Pfizer ( PFE) and Merck ( MRK) were helping lift those shares higher, joining Wal-Mart ( WMT) as the only Dow performers trading in positive territory.

The Dow was seeing volume of 242 million shares, compared with an average of 200 million.

Pfizer surpassed analysts' expectations with adjusted first-quarter earnings of 60 cents a share. Although the company reaffirmed its guidance for year-end adjusted earnings of $2.10 to $2.20 a share, it lowered its 2012 outlook on account of the recently enacted health care legislation. Pfizer's stock gained 2.1% to $17.26.

Merck beat estimates with an adjusted first-quarter profit of 83 cents a share on sales of $11.42 billion. Merck shares climbed 1.5%, to $35.81.

Archer Daniels Midland ( ADM) reported a third-quarter profit of 65 cents a share and sales that rose 2% to $15.14 billion, which was below the $15.65 billion in sales that analysts had projected. The stock lost 5.4%, to $26.22.

UBS ( UBS) swung to a first-quarter profit of 2.2 billion Swiss francs ($2.02 billion), topping expectations. The stock fell off 5.5%, to $14.78.

CVS Caremark ( CVS) beat Wall Street expectations by 2 cents but fell short of the $24.12 billion in sales that analysts had projected with first-quarter revenue of $23.76 billion. CVS shares shed 1.6%, to $36.48.

Shares of MasterCard ( MA) improved 0.2% following better-than-expected first-quarter results with a profit of $3.46 a share on sales of $1.31 billion.

Sirius XM ( SIRI) posted adjusted earnings of a penny a share, compared with the break-even quarter that analysts had been expecting. Sales rose to $670.6 million but missed expectations for revenue of $671.3 million. Sirius shares traded 4.1% lower at $1.18.

Shares of financial data provider Interactive Data ( IDC) gained 0.5% on news that it agreed to be acquired by private-equity groups Silver Lake and Warburg Pincus in a deal valued at $3.4 billion.

Nissan said air-bag problems forced the car manufacturer to recall almost 135,000 of its Infiniti G35 models, according to an Associated Press report.

American depositary shares of BP ( BP) traded in positive territory today after getting pummeled for the past few sessions. The company has come under increasing scrutiny after a rig it leased exploded, setting off a chain of events resulting in an ever-expanding oil spill in the Gulf of Mexico. BP gained 2% today.

Commodities and the Dollar

With eurozone fears boosting the dollar, crude oil for June delivery shed $3.45, to settle at $82.74 a barrel.

Elsewhere in commodity markets, the June gold contract lost $14.10 to settle at $1,169.20 an ounce.

The dollar was trading higher against a basket of currencies, with the dollar index up by 1.2%.


The benchmark 10-year Treasury strengthened 24/32, diluting the yield to 3.602%.

The two-year note gained 3/32, dropping the yield to 0.956%. The 30-year bond rose 1 24/32, lowering the yield to 4.426%.

--Written by Melinda Peer and Sung Moss in New York.

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