FRANKFURT -- European stock markets remained heavy and volatile, burdened by rising bond yields and fear of a tumble on Wall Street.

Major indices slipped sharply in the early afternoon after mild losses this morning. The

Dax

broke a key support level.

"It feels like the beginning of some bad times," said Gary Dugan, a European equities strategist at

J.P. Morgan

in London.

Indices had bounced back a bit from the early afternoon plunge. In Frankfurt, the

Xetra Dax

was down 109 points, or 2.2%, at 4942, while in London the

FTSE

was down 30 at 5804 and in Paris the

CAC

was down 55, or 1.3%, at 4098.

Stocks today also were being undermined by strength in the euro, which is not good for European exporters. The euro was last bid at $1.1334, up from yesterday's low around $1.1214.

The focus is now on Wall Street, which some think is highly vulnerable to a swift move down.

S&P 500

futures were extremely volatile, down 3.90 points at 1243.30. The U.S. long bond was yielding 5.33%.

Marcel Mussler, technical analyst at

Oliver Klemm Wertpapierhandels

in Frankfurt, said the break below Dax 4980 indicates a bleak outlook for stocks. He sees minor support at 4880 and 4770, but said: "You can believe it or not, but the next major support is 4420."

The Dax could be saved from a rendezvous with 4420 if it is able to claw back and close today above 4980, he said. But he thinks investors still holding painful long positions should not be expecting such a miracle. "The chances of the Dax closing above 4980 appear very small," he said.

Movement today in

Commerzbank

was a good reflection of underlying tension in the broad market. The bank jumped as high as up 2.6% after reporting better-than-expected earnings. But rather jumping aboard for a ride higher, investors swatted the stock down by taking profits. Commerzbank was last down 1.2%.

Lloyds

was down 2.5%,

Dresdner Bank

2.4% and

Societe Generale

2.2%.

Oil shares also were hit, with

Elf Aquitaine

(ELF) - Get Report

down 2.9%,

Total

(TOT) - Get Report

2.9% and

Shell

(SC) - Get Report

2.1%. And German engineering firm

Metallgesellschaft

was down 7.2%, erasing more than half of yesterday's 13.2% gain on better-than-expected results.

SmithKline Beecham

(SBH) - Get Report

rose 2.6% on reports it would a sell two units in order to focus more on drugs. SmithKline will sell

Diversified Pharmaceutical Services

to

Express Scripts

(ESRX)

for $700 million in cash and its U.S. laboratory testing unit to

Quest Diagnostic

(DGX) - Get Report

for $1.27 billion.