Wednesday, August 10, 2011

Dow plunges 400 points at opening bell today as Europe fears return

U.S. stocks fell sharply Wednesday, wiping out the previous session's huge rally, as fears about Europe's ongoing debt crisis resurfaced.

The Dow Jones industrial average (INDU) dropped 430 points, or 3.8%. The index fell as much as 467 points, which exceeded the gain in Tuesday's massive advance.

The S&P 500 (SPX) fell 43 points, or 3.7%, and the Nasdaq composite (COMP) lost 84 points, or 3.4%.

Ever since Standard and Poor's stripped the United States of its AAA credit rating Friday, fears have been building that rating agencies may also downgrade AAA-rated nations in Europe, since they are also struggling with severe debt problems.

On Wednesday, shares of French bank Societe Generale, or SocGen, tumbled almost 20% on the Paris stock exchange amid speculation that France, Europe's second largest economy after Germany, may be first to face a rating cut.

Even though the major rating agencies have reiterated France's AAA rating, "there's growing concern that France could get downgraded," said Tom Schrader, managing director at Stifel Nicolaus. "There's fear that S&P might do something stupid."

Financial stocks led the sell-off in U.S markets, as investors worried that problems in the European banking sector could spillover into the U.S. banks. (more)