US stocks drop as euro angst lifts fear gauge
US stocks tumbled yesterday as surging bond yields in Spain and Italy ratcheted up tensions in financial markets about Europe’s ability to solve its growing debt crisis.
Angst over Europe drove investors away from risky assets and into safe havens. US Treasury benchmark yields fell to their lowest in at least 60 years, prices for crude fell more than 3 per cent and the euro dropped below $1.24 to a 23-month low.
The S&P 500 has fallen nearly 6 per cent in May, heading for its worst monthly performance since September as traders focused on Europe. However, US data later in the week, including first-quarter gross domestic product and monthly payrolls, could delink Wall Street from overseas headlines.
Yields rose sharply at an Italian sale of five- and 10-year debt, and investors worried about Spain’s plans to raise new funds to shore up its banks even as borrowing costs rose there.
Adding to worries was Greece’s upcoming election, which could determine if the country will stay or not in the Eurozone.
The CBOE volatility index, a gauge of market fear, jumped 14.8 per cent, its largest gain in almost three months.
The Dow Jones industrial average lost 160.83 points, or 1.28 per cent, to 12,419.86. The S&P 500 Index dropped 19.10 points, or 1.43 per cent, to 1,313.32. The Nasdaq Composite fell 33.63 points, or 1.17 per cent, to 2,837.36.