Fear Rushes Back: Euro Woes, Economic Malaise Incite Violent Selling

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The rollercoaster ride on Wall Street continued for yet another day as economic jitters and euro-zone fears crushed equities and sent the blue chips spiraling more than 500 points.  

Today's Markets

The Dow Jones Industrial Average tumbled 520 points, or 4.6%, to 10,720, the S&P 500 slid 51.8 points, or 4.4%, to 1,121 and the Nasdaq Composite dipped 101 points, or 4.1%, to 2,381. 

The euro zone debt crisis, which had fallen into the background, once again took the spotlight on Wednesday.  Trading was ferocious once again, with the VIX, Wall Street's volatility gauge, soared 25%. 

The selloff represents "an across-the-board repricing of risk to reflect the fact that economic growth in U.S. and Europe is not what people thought it was,said Jim Rickards, senior managing director for market intelligence at Omnis. 

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Gold prices extended their meteoric run as traders once again sought out shelter from free-falling equities.  The precious metal jumped $41.30, or 2.4%, to $1,784 a troy ounce. Meanwhile, long-term Treasury prices once again rallied, pushing the yield on the 10-year note to 2.14%. 

The U.S. financial sector, which sustained steep losses on Monday, only to rebound on Tuesday, were once again deep in negative territory. Bank of America (BAC) plummeted more than 10% and was the second-worst performing component of the Dow. Volume on the New York Stock Exchange clocked in at 8.2 billion shares, shy of the five-day average of 8.6 billion, but well higher than the 4.3 billion year-to-date mean. 

Europe Comes Into Focus

French President Nicholas Sarkozy held an extraordinary meeting with the country's finance ministers and central bank, according to a report by The Wall Street Journal. Reports that the meetings may have been to discuss a looming downgrade of France,which rattled stock futures, were softened after Moody's Investor Service, Fitch and Standard & Poor's all affirmed France's AAA rating, with a stable outlook.  

However, there were still concerns over how much exposure European banks have to the sovereign debt of countries like Greece, which narrowly averted a default just a month ago. 

"Speculation surrounding French bank Societe Generale ... has smashed banking stocks across Europe," Will Hedden, a London-based trader at IG Index, wrote in a note to clients. 

Indeed, Societe Generale nose dived 20% as rumors swirled about its capital position. The bank denied all market rumors, but failed to stem the deep losses.  Additionally, the cost to insure the debt of the banks soared in late-day trading in Europe. 

The euro extended losses from earlier in the session, recently skidding 1.3%. 

Also on the European front, The European Central Bank unveiled plans to buy-up Spanish and Italian bonds earlier in the week, as fears in the credit markets have spread from relatively small economies like Greece to larger ones. 

Stocks Oversold? 

Many investors, however, have noted that there may be buying opportunities created amid the tumult on Wall Street. 

"Stocks are oversold," Bob Doll, chief equity strategist at BlackRock, said in a release.  Doll also added that the company that manages more than $3 trillion in assets still sees a recession as unlikely, although, the risk of falling back into recession is "higher than normal." 

The Federal Reserve said on Tuesday it plans on keeping interest rates at historically-low levels for the next two years in a bid to keep the economy afloat.  The central bank also said it sees the economy, and labor market, rebounding less quickly than it initially forecast. 

Concerns over the state of the economic recovery have weighed heavily on the markets over the past several weeks as fears have heightened that the U.S. economy could double dip into recession territory. The flow of economic data releases has been slow this week, with only one report released on Wednesday. 

Wholesale inventories ticked 0.6% higher in June, less than the 1% increase economists forecast. Wholesale sales, however, increased 0.6% -- a quicker rate than the 0.3% increase that was expected. 

While the report in itself had little affect on markets that were squarely focused on euro zone debt concerns, wholesale inventories are a component in calculations of Gross Domestic Product.  The lower level of inventories, in fact, prompted Barclays Capital to cut its second-quarter economic growth forecast 0.3 percentage points, on the data. 

Energy markets, like equities, have been very volatile. The weekly energy inventory report was more bullish than expected, helping lift commodities. Crude stocks fell 5.2 million barrels, compared with a forecast of 1.5 million barrel build.  Gasoline inventories fell 1.6 million barrels, short of the 500,000 barrel build that was expected. 

Light, sweet crude climbed $3.59, or 4.5%, to $82.89 a barrel after settling at a new 2011 low in the prior day.  Wholesale RBOB gasoline jumped 11 cents, or 4.3%, to $2.78 a gallon. 

Corporate News

Macy's (M) posted profits of 55 cents a share, zipping past estimates of 50 cents. The retailer also boosted its full-year forecast to a range of $2.60 to $2.65, topping expectations of $2.58 a share. 

Foreign Markets

The English FTSE 100 dropped 3.1% to 5,007, the French CAC 40 plunged 5.5% to 3,003, and the German DAX slumped 5.1% to 5,613. 

In Asia, the Japanese Nikkei 225 jumped 1.1% to 9,039 and the Chinese Hang Seng soared 2.3% to 19,784. 

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