EU Debt Fears Hit Stocks After Ireland Downgrade

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Moody's late-day downgrade of Ireland's sovereign debt to junk status reignited concerns over the euro zone sovereign debt crisis, sending stocks solidly into the red after a highly-volatile trading session.

Today's Markets

The Dow Jones Industrial Average fell 58.9 points, or 0.47%, to 12,447, the S&P 500 dropped 5.9 points, or 0.44%, to 1,314 and the Nasdaq Composite dipped 20.7 points, or 0.74%, to 2,782. The FOX 50 slid 4 points to 924.

Concerns that European officials may have trouble containing the sovereign debt crisis in the region once again took the spotlight on Tuesday after stocks wavered most of the session.

Moody's Investor Service cut Ireland's sovereign debt rating one notch to Ba1, which is in "junk" territory,  from Baa3, citing concerns that the country will need support after the joint European Union/International Monetary Fund program ends in 2013. The euro slumped on the news, falling 0.48%, while the dollar gained 0.16% against a basket of world currencies.

EU officials, meeting in Brussels, acknowledged for the first time on Tuesday the Greece might have to selectively default on some of its debt in order to garner private sector support for a second bailout.  Greece has a nearly half a trillion dollar public debt load, and has already received a bailout from the EU and International Monetary Fund.

Fears that a default in Greece could destabilize regional credit markets, such as Italy's, sent shares in Europe lower. Indeed, the Dow Jones Europe Total Stock Market Index shed 0.4% on the day, paring steeper losses.

Italy is of particular concern, analysts say, because it has a roughly $2.6 trillion public debt burden, amounting to 119% of its annual economic output, making it second only to Greece in terms of debt to GDP of euro zone countries.

"Investors are worried that we are seeing a replay of what happened with Greece and Ireland, where soaring bond rates eventually ended up in a bailout," wrote Ben Critchley, a sales trader at IG Index, a London-based trading company, referring to the European markets.

The U.S. trade deficit widened more than expected in May to $50.2 billion from $43.6 billion the prior month, according to the Commerce Department.  Wall Street was expecting a reading of $44 billion.  The deficit was driven to its highest level since 2008 by imports that jumped 2.6% to the second-highest level ever.

The balance of trade figures directly into calculations of broader economic output: the bigger the deficit, the more it cuts from Gross Domestic Product.

Also on the economic front, Fed officials were less optimistic about the pace of the economic recovery when they met in late-June than they were in April, and some would support additional easing measures, minutes released Tuesday show.

Energy markets closed the day with considerable gains.

Light, sweet crude jumped $2.28, or 2.4%, to $97.43 a barrel.  Wholesale RBOB gasoline rose 2 cents, or 0.9%, to $3.10 a gallon.

Prices at the pump are making their way higher this week following a small retreat the prior week.  A gallon of regular gasoline costs $3.64 on average nationwide, down from $3.71 last month, but well higher than the $2.72 drivers paid last year, according to the AAA Fuel Gauge Report.

In metals, gold gained $13.10, or 0.85%, to $1,562 a troy ounce.  Silver fell 6 cents, or 0.18%, to $35.63 a troy ounce.

Corporate News

News Corp. (NASDAQ:NWSA) unveiled a $5 billion share repurchase program that will be in effect over roughly the next year, sending shares soaring.  News Corp. owns a slew of media companies, including FOX Business Network and

Cisco (NASDAQ:CSCO) could slash as many as 10,000 jobs, which amounts to 14% of its total workforce, according to a report by Bloomberg.

Pandora (NYSE:P) boosted its user count to 100 million from 90 million in April and saw its market share grow to 3.6% in the last 6 months from 2.3% from the end of last year.

Foreign Markets

European shares managed to pare steep losses toward the end of the session.

The English FTSE 100 fell 0.9% to 5,876, the French CAC 40 slid 0.9% to 3,773 and the German DAX dipped 0.82% to 7,171.

In Asia, the Japanese Nikkei 225 fell 1.4% and the Chinese Hang Seng plunged 3.1% to 21,663.