By Jonathan Cheng
U.S. stocks sank for a third straight day as investors
confronted a drop in the euro and steep declines in commodity
prices.
The Dow Jones Industrial Average gave up 131.46 points, or
1.10%, to finish at 11823.48, a two-week low. The Standard &
Poor's 500-stock index lost 13.91 points, or 1.13%, to 1211.82 and
the Nasdaq Composite shed 39.96 points, or 1.55%, to 2539.31.
Leading the declines were energy stocks, as commodity prices
fell steeply. Caterpillar fell 4.4% to lead the Dow decliners,
while Chevron gave up 3% and Exxon Mobil fell 1.4%. Technology
stocks were also weak, with Hewlett-Packard and Cisco Systems
dropping 1.6% and 2.7%, respectively.
European markets finished at the day's lows, as sentiment toward
Europe's single currency soured after German Chancellor Angela
Merkel said Tuesday she opposed raising the lending limit for the
euro-zone bailout fund.
The Stoxx Europe 600 lost 2.1%, and France's CAC 40 index
dropped 3.3% for its worst one-day decline in six weeks. The euro
also fell below $1.30 for the first time since January, trading
recently at $1.2981. The currency has fallen more than 3% this
week.
"People have lost faith in Europe," said Mike Boyle, portfolio
manager at Advisors Asset Management. "Clearly, the driving force
is Europe. The issue is that everyone wants a cure today, and they
need time to come to a decent conclusion."
Separately, Italy sold the maximum targeted amount of five-year
bonds, but was forced to pay a euro-era high average yield of 6.47%
to do so, above the 6.29% paid at the previous auction last month.
The country's 10-year bond yield rose back above the key 7% level,
to 7.169%. Spain, Italy and France all saw their government bond
yields widen over German bunds.
In the U.S., the dollar's strong rise against most of its major
counterparts put pressure on commodity prices, many of which are
priced in dollars. It has also worried some money managers who had
taken encouragement from a recent string of strong economic numbers
in the U.S.
"A rising dollar is going to be problematic for us," said
Jennifer Ellison, principal at Bingham, Osborn & Scarborough in
San Francisco, Calif., who expects the dollar's strength to
continue climbing against the beleaguered euro.
"It just puts pressure on the little bits of good news that
we've had domestically," Ms. Ellison said. "We're very worried
about that."
In Asia, the Shanghai Composite gave up 0.9% to close at its
lowest level since March 2009.
Gold futures tumbled 4.6% to settle at $1,584.30 an ounce. That
decline, the biggest one-day drop in nearly three months, extended
gold's December loss to 9.2% and sent the precious metal to a
five-month low. Crude oil futures slumped 5.2% to $94.95 a barrel.
Copper dropped 4.7%, while silver tumbled 7.4%. Yields on the
10-year Treasury note fell to 1.903%, after an auction of 30-year
bonds sold at a record low yield of 2.925%.
Data on import and export prices in November showed relatively
muted signs of inflation, with import prices ticking up 0.7%, a
touch lower than expectations for a 1.1% gain.
In corporate news, shares of Avon Products rallied 5.1% to top
the S&P 500 gainers list after the beauty products company said
Andrea Jung, currently chairman and chief executive, will
relinquish her role as CEO when a replacement is found.
On the downside, First Solar tumbled 21% after the solar-panel
maker cut its outlook for the year, citing continued delays in
certain projects in its systems business. The company also provided
a disappointing 2012 outlook.
Cheniere Energy Inc. slumped 10% after the energy company said
it would offer 36 million shares of common stock for sale to the
public.