U.S. Stocks Retreat 1% on Greece, Spain Fears

by Kate Gibson

U.S. stocks retreated Wednesday, wiping out the prior session’s rally, as bond yields in Spain and Italy surged and polls out of Greece added to the uncertainty over whether it would remain in the euro zone. “If Greece ends up leaving the European Union and the debt crisis remains reasonably well contained, then world growth will continue at a modest pace. But if that contagion becomes chaotic, then all bets are off,” said Mark Martiak, senior wealth strategist at Premier/First Allied Securities.

The Dow Jones Industrial Average dropped 160.83 points, or 1.3%, to 12,419.86, with all but one of its 30 components in the red. On Tuesday, it had gained nearly 126 points in a broad surge fueled by hopes for Greece and more global stimulus.

The S&P 500 Index on Wednesday shed 19.10 points, or 1.4%, to end at 1,313.32, with energy and financial firms hardest hit among its 10 sectors. All sectors ended lower.

The Nasdaq Composite Index declined 33.63 points, or 1.2%, to 2,837.36.

For the month that ends Thursday, the benchmark indexes are down at least 6%.

For every stock rising, roughly six fell on the New York Stock Exchange, where 768 million shares traded. NYSE composite volume was 3.5 billion, while volume of Nasdaq-listed shares was 1.7 billion.

Gold gained, with the futures contract for August delivery rising $14.70 to end at $1,565.70 an ounce. Oil tumbled $2.94 to finish at $87.82 a barrel.

Spain’s 10-year bond yields hit a six-month high and closed 22 basis points higher, at 6.7%, as Spanish authorities discussed how they would pay for the $23.6 billion bailout of lender Bankia S.A. and new data showed private deposits fled Spanish banks in April.

Italy’s borrowing costs rose as the government sold debt but fell short of its target.

As stocks in Europe tumbled, the European Commission called for direct aid for troubled euro-zone banks.

The latest poll from Greece had the leftist Syriza party taking the lead against the pro-bailout conservatives ahead of a parliamentary election June 17 that could determine if the nation remains in the euro zone.

Bloomberg News reported that a survey found most Greek voters want to revise the terms of the nation’s financial rescue.

“There’s a Greek myth about a guy named Sisyphus who was compelled to roll a rock up a hill, only to see it roll back down over and over again, and it seems like that’s what we have here,” said Robert Pavlik, chief market strategist at Banyan Partners in New York, of the European debt crisis.

“Even if Greece stays in the euro and Spain can somehow recapitalize its banks, they are still in an austerity-plagued environment with low or negative growth, and that’s going to impact the rest of the world,” he added.

In the United States, the 10-year Treasury yield fell to a record low of 1.62%.

The National Association of Realtors reported its index of pending home sales in April unexpectedly declined, offsetting recent data that inspired hopes that housing had hit a bottom.

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