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U.S. stocks pared their losses in mid-day action on Thursday following a steep selloff that was ignited by concerns out of Europe.
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As of 12:34 p.m. ET, the Dow Jones Industrial Average fell 72.21 points, or 0.43%, to 16913, the S&P 500 dropped 7.03 points, or 0.36%, to 1965, and the Nasdaq Composite slipped 15.42 points, or 0.35%, to 4403.
A subsidiary of Banco Espírito Santo reportedly missed a coupon payment on short-term debt, sparking concerns about the eurozone country’s banking sector. The news reports sent Banco Espírito Santo’s shares plummeting more than 15%, and pulled stocks trading across the 18-member currency bloc down around 2%.
Perhaps more worrisome, traders yanked funds out of Portuguese debt, with the yield on the country’s benchmark 10-year bonds jumping as much as 0.19-percentage point, according to data from Barclays. Other periphery nations took a hit, as well.
“The ripple effect to the entire European bank sector is clearly evident,” Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a note to clients, pointing to the widening periphery spreads and steep drops among eurozone bank stocks.
Reports on industrial production in Europe helped fuel concerns over the region’s economic recovery. Italy, France and the Netherlands each saw industrial production contract in May, while Italy fell the most since November 2012. Earlier this week, Germany said industrial production in the eurozone’s largest economy booked its sharpest decline in two years.
Investors took cover in German and U.S. debt, sending the borrowing costs on those two issues falling, in a move that was reminiscent of the eurozone debt crisis. The yield on the benchmark 10-year Treasury note dropped 0.04-percentage points to 2.51%. Traders also jumped into gold, which rose $14.20, or 1.1%, to $1,338 a troy ounce.
The CBOE’s volatility index climbed roughly 9% after touching its highest level since early May. There are three times as many trades in declining shares as there are in rising shares, indicating a widespread selloff.
A better-than-expected report on initial jobless claims and wholesale inventories that met expectations helped Wall Street pare some of its losses.
The U.S. Department of Labor said the number of Americans filing for first-time unemployment benefits fell 11,000 to 304,000 during the week ended July 5. Economists expected jobless claims to remain level at 315,000.
Wholesale inventories rose 0.5% in May, matching estimates. Excluding automobiles, inventories were up 0.3%. Economists will factor in the report when making projections for gross domestic product.
In commodities, West Texas Intermediate crude oil continued its steady decline, falling four cents to $102.25 a barrel. Oil futures are on pace to retreat for the 10th consecutive session. Wholesale New York Harbor gasoline fell 0.04% to $2.94 a gallon.