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Wall Street was haunted by the specter of Europe's debt crisis poisoning major global economies, shoving the broad S&P into the red for the sixth-straight session.
Wall Street has been fixated on the euro zone debt crisis, which is increasingly becoming a global debacle. Indeed, the broad S&P 500 fell for its sixth-straight day on Wednesday in a sign that investors are growing wary of the rapid contagion.
On the day, financial, energy and materials shares sustained the heaviest selling as a result of the European jitters. Indeed, Bank of America (NYSE:BAC) and Alcoaa (NYSE:AA) were among the worst-performing blue chips.
Volatility climbed 4.5% and yields on U.S. government debt fell as traders fled equity markets. The yield on the benchmark 10-year U.S. Treasury note fell to 1.878% from 1.92%.
Meanwhile, the price to insure BofA's debt hit the highest level since October, while the cost of insuring other banks' debt rose as well.
German Debt Auction Spooks Traders
An auction of German 10-year bonds was seen as dismal: the country attempted to raise raise 6 billion euros but only managed to drum up 3.889 billion euros, representing a 35% shortfall. This was the worst demand ever for 10-year German debt. The European Union's biggest economy had previously been seen as a safe haven during the crisis, and this development represents a dangerous development for the crisis that is already in its second year.
"This is a warning shot to Germany" to do more to support the 17-member euro currency bloc, and calm jittery debt markets, Kathleen Brooks, research director for FOREX.com, said in an interview with FOX Business.
The yield on the 10-year German bund rose close to 2%, while other euro zone countries saw borrowing costs continue to rise as well. Of particular concern have been Italy and Spain -- both of which have seen benchmark yields near the closely-eyed 7% level.
Standard & Poor's warned on Wednesday that the euro zone may face a recession if debt yields remain high, potentially creating a feedback loop that can bring more pain to highly-indebted countries there.
European blue chips tumbled 1.9% while the euro plummeted 1.1% to $1.337 -- the lowest level since October.
Chinese Manufacturing Data Disappoint
Also concerning for market participants is a preliminary reading of Chinese manufacturing data in November. The Markit/HSBC Flash China Manufacturing gauge took its swiftest fall since March 2009, showing manufacturing in the world's second-biggest economy is now contracting. A separate report showed the euro zone economy may contract between 0.5% to 0.6% in the fourth quarter.
Market participants also parsed through a round of mixed data on the U.S. economy.
New claims for unemployment benefits climbed to 393,000 last week from a revised 391,000 the week prior. Economists had expected claims to rise to 390,000 from an initially reported 388,000. The labor market has been slow to improve after being slammed during the economy downturn.
Meanwhile, orders for long-lasting goods fell 0.7% in October from the month prior, a shallower fall than the 1% decline economists forecast. Excluding the transportation component, orders were up 0.7% compared with estimates of no change. These data figure directly into broader calculations of economic growth.
Personal spending rose 0.1% in October from September, less than the 0.4% economists had expected, while personal income rose 0.4%, slightly higher than the 0.3% expected.
A final reading on consumer sentiment for the month of November checked in at 64.1, slightly less than a preliminary reading of 64.2 and below estimates of 64.5, according to a survey by Thomson Reuters and the University of Michigan. Still, sentiment in November is at the highest level since June.
The consumer portion of the economy is one of the most important components, so these data can have a particularly strong impact.
Commodities in the Red
Energy markets were in the red despite a mixed inventory report from the Energy Department. The report was bullish for oil yet bearish for gas. Crude inventories fell 6.2 million barrels, compared with the 500,000 barrel build analysts expected. Oil stocks jumped 4.5 million barrels much bigger than the 1.1 million barrel build that was predicted.
The benchmark crude oil contract traded in New York fell $1.84, or 1.9%, to $96.17 a barrel. Wholesale RBOB gasoline fell 4 cents, or 1.7%, to $2.52 a gallon.
In metals, gold fell $6.50, or 0.38%, to $1,696 a troy ounce.
European blue chips fell 1.9%, the English FTSE 100 slid 1.3% to 5,140 and the German DAX tumbled 1.4% to 5,458.
In Asia, the Japanese Nikkei 225 fell 0.4% to 8,315 and the Chinese Hang Seng plunged 2.1% to 17,864.