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More evidence that credit conditions in Spain are worsening, combined with a weak reading on U.S. retail sales, sent Wall Street solidly into the red on Wednesday.
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The Dow Jones Industrial Average fell 77.4 points, or 0.62%, to 12496, the S&P 500 dipped 9.3 points, or 0.7%, to 1315 and the Nasdaq Composite slipped 24.5 points, or 0.86%, to 2819.
The markets have had a volatile week, with the Dow shedding 143 points on Monday just to tack on 163 points on Tuesday. Market participants have been fixated on the crisis in the eurozone, with the critical Greek elections looming just days away.
"We believe the risks from Europe will remain a key market driver for the foreseeable future," analysts at Barcalys Capital wrote in a note to clients. The analysts added that the downside risk resulting from the elections remains "considerable."
Egan-Jones sliced its debt rating on Spain to CCC+ from B, with a negative outlook, in a move that roiled the markets late in the session. That came after Italy paid the highest yield in six months to borrow for one year on private markets in a bond auction. In secondary markets, Italy's benchmark 10-year bonds yielded 6.11%, while Spain's yield checked in at 6.75%. Analysts say yields above 6% are perilously high, and could potentially limit the countries' access to private capital. Still, both countries saw the cost to insure their debt against a default fall slightly, according to financial data firm Markit.
Investors have been paying especially close attention to the borrowing costs both of those countries pay amid worries they could be the next victims of the crisis.
Meanwhile, factory output in the 17-member currency bloc slid 0.8% in April from March, according to data from Eurostat. It was the biggest drop in a month.
The Euro Stoxx 50, which tracks eurozone blue chips, edged higher by 0.01%.
On the U.S. front, retail sales fell 0.2% in May from April as expected, according to the Commerce Department. However, excluding the auto sector, sales were down 0.4%, compared to expectations of no change. Gasoline stations and building-material stores took the biggest hit by a wide margin, while automakers saw the biggest gains.
"Pervasive weakness in a broad number of categories in May and April suggests softer consumer spending in the second quarter than previously thought," analysts at Nomura wrote in a note to clients.
A separate report from the Labor Department showed wholesale inflation sliding 1% in May from April, which was a bigger drop than the 0.6% that was expected. It represented the biggest slide since July 2009. Excluding the more volatile food and energy components, prices were up 0.2%. The more closely-watched data on consumer prices are due out on Thursday.
Gasoline futures rallied on the news that gasoline inventories shrunk by 1.7 million barrels last week, compared with expectations of a 1.1 million barrel build, before pulling back. New York Harbor gasoline rose 0.2% to $2.66 a gallon. Crude oil inventories were off by 191,000 barrels last week, a shallower drop than the 1.4 million that was expected. Oil was down on the day, with the benchmark contract dipping 0.84% to $82.62 a barrel.
In metals, gold rose $5.60, or 0.2%, to $1,619 a troy ounce.
The Euro Stoxx 50 edged higher by 0.01%, the English FTSE 100 gained 0.18% to 5484 and the German DAX slipped 0.14% to 6152.
In Asia, the Japanese Nikkei 225 climbed 0.6% to 8588 and the Chinese Hang Seng jumped 0.82% to 19027.