European debt worries depress U.S. stocks despite jobs gains
Erratic trading on the global markets drove U.S. stocks to another day of losses Wednesday as investor concerns about Greece's debt crisis lingered.
The day started with a sell-off, followed by a surge of optimism around noon that briefly sent shares of U.S. companies into positive territory.
But the slide quickly resumed, and major U.S. stock indicators were down at closing, though not as sharply as the previous day, when the markets suffered their worst losses in three months.
The Dow Jones industrial average fell 0.5 percent, or 58.65 points, to close at 10,868.12. The Standard & Poor's 500-stock index, a broader measure of U.S. stocks, dropped 0.7 percent, or 7.73 points, to 1165.87. And the tech-heavy Nasdaq composite index tumbled 0.9 percent, or 21.96 points, to 2402.29.
"We're in the midst of a pull-back here," said Peter Cardillo, chief market economist with New York-based Avalon Partners. "Risk aversion is back in fashion."
Fears that Greece's financial troubles will spread to other European countries were fanned early in the day when Moody's Investors Service said it would review Portugal's debt ratings for a possible downgrade within three months because the country had failed to rein in its budget deficit.
Violent riots that broke out in Athens, killing three people who were trapped in a bank set ablaze by protesters, further unnerved investors. The mobs were protesting austerity measures -- such as pay cuts and tax increases -- that need to be put in place for Greece to receive the $141 billion bailout offered this weekend by the International Monetary Fund and the European Union.
The civil unrest cast doubts about the Socialist administration's ability to impose those measures and avoid bankruptcy.
Yields on debt issued by Greece surged, suggesting that investors fear Greece will default. Bond yields were up in Portugal and Spain as well. A higher yield means that investors are demanding a bigger return to buy a government's debt.
Meanwhile, the euro fell to its lowest level against the dollar in more than a year. The drop makes it difficult for U.S. exports to compete with European products.
"It's almost a cathartic blowout on the euro," said Alan Ruskin, chief international strategist at RBS Securities.
The gloom of Europe largely overshadowed upbeat jobs news Wednesday from an ADP Employer Services report, which showed the U.S. private sector gaining 32,000 jobs last month. The survey results come two days before a closely watched monthly Labor Department report on the U.S. jobs market.
Other data from the Institute for Supply Management showed that its index of activity in the non-manufacturing sector grew in April for the fourth straight month. The institute compiles an index based on surveys of large businesses. The index's reading was 55.4, about the same as the previous month, but less than the 56 that economists surveyed by Bloomberg had predicted. Any reading above 50 signals expansion.
Ruskin said a string of robust economic and earnings data are "giving the [U.S.] stock market support against pernicious forces working the other direction."