Dow suffers biggest one-day drop in 2012

US stocks tumbled on Tuesday and took its biggest one-day drop so far in 2012. This follows steep losses that occurred in Europe over the past two days just before a critical deadline in the Greek debt crisis. Attention is focused on Greece and whether or not a default might occur sometime this month.

March 6, 2012
USA Today

NEW YORK (AP) – U.S. stocks fell sharply Tuesday, following steep losses in European markets two days before a critical deadline in the Greek debt crisis. The Dow Jones industrial average suffered its biggest decline during a trading day this year.

The Dow, the broader Standard & Poor's 500 index and the Nasdaq composite index all were trading sharply lower in midday trading. All three indexes were down at least 1% or more in the first hour of trading.

Having rallied hard over the past few months, stock markets seem to be running out of steam, with the more bearish investors warning stocks have rallied too far too soon.

The Dow has not closed down 100 points in 45 straight trading sessions, the longest streak since 2006.

Over the past few weeks, many of the world's major markets have pushed above levels last seen last summer. On Wall Street, the U.S., the gains have been even more pronounced. The S&P 500 index is trading double its bear market low of 666 of March 2009.

The rest of this week, economic indicators will be in focus, especially in the U.S., where a busy few days culminate with Friday's nonfarm payrolls data. The jobs figures often set the market tone for a week or two after their release.

Tuesday, though, attention returned to Greece. The question now is how many private creditors will accept planned bond swaps that are part of the latest bailout package. Success depends on a high percentage taking part. Otherwise, Greece could default on March 20.

Major banks and investment funds have signed on for the swap, but it remains unclear whether hedge funds, which had already bought the bonds at a steep discount and may profit from bond insurance payouts if Greece defaults, will agree.

The swap deal is vital for Greece to cut its debt and get a bailout of €130 billion, or $172 billion, from other countries and the International Monetary Fund. Without the bailout, Greece could default on its debt later this month and rattle markets around the world.

In the U.S., worries about Greece come on top of concerns about a recession in Europe and slowing economic growth in China. Some investors also believe the rally in U.S. stocks this year — the Standard & Poor's 500 is up 7% — has come too far too fast.

On Tuesday, all 10 industry groups in the S&P 500 were lower, with materials stocks and banks leading the decline.

All but one of the 30 stocks that make up Dow, Kraft Foods (KFT), declined. Caterpillar (CAT), which makes heavy equipment and depends heavily on China for profits, fell 3.2%, the worst of the Dow 30.

Bill Stone, chief investment strategist for PNC Wealth Management, called Tuesday's decline "fairly rational," considering how much the market has climbed and the economic worries in Greece and the rest of Europe.

"You need the pullback to give people opportunities to want to get involved again," Stone said.

Stocks fell almost 3% in Germany, Spain and France. Thursday is the deadline for private investors to sign up to swap their Greek government bonds for replacements with a lower face value and interest rate.

Oil prices slipped $1.49 to $105.23 per barrel on the New York Mercantile Exchange. New York crude has risen from $96 last month amid fears of a disruption in global oil supplies driven by the potential for military conflict with Iran.

The price of gold fell $33 per ounce, almost 2%, to $1,670 per ounce. Silver, platinum and copper all fell more than 2%, because of concerns about Europe and weaker economic demand in China.

"Global growth fears now are hitting home, and we're seeing selling across the board," said Matt Zeman, a market analyst for Kingsview Financial.

Yields on U.S. government debt also fell as investors moved their money into what they perceive to be a safer asset. The yield on the benchmark 10-year Treasury note fell to 1.94% from 2.01% late Monday. Bond yields fall when their prices rise.

Among stocks making big moves:

— Weight loss company Nutrisystem (NTRI) fell 9% after it reported a bigger-than-expected fourth-quarter loss and a disappointing outlook.

— General Motors (GM) fell 4.7% after saying it will pay €304 million, or $402 million, for a 7% stake in Peugeot, which will make it the French carmaker's second-largest shareholder after the Peugeot family.

— VeriFone Systems (PAY) rose 6.3% after the maker of electronic payment systems predicted a bigger-than-expected 2012 profit.

— Apple (AAPL) fell 1.6%, extending its two-day decline to 3.6 percent, one day before the expected release of its iPad 3 tablet computer.

Earlier in Asia, mainland Chinese shares saw their biggest loss in almost a month a day after the lowering of the country's economic growth target. The benchmark Shanghai Composite Index lost 1.4% to 2,410.45 while the Shenzhen Composite Index for China's second smaller stock market lost 1% to 971.8.

Elsewhere, Japan's Nikkei 225 index dropped 0.6% to 9,637.63 and South Korea's Kospi shed 0.8% to 2,000.36. Hong Kong's Hang Seng lost 2.2% to 20,806.25

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