Stocks plummeted Wednesday on continued fears about Europe's sovereign debt crisis and concern that the global economic recovery is faltering.
The Dow Jones industrial average closed down 519.83, or 4.62%, at 10,719.94; the S&P 500 fell 51.77, or 4.42%, ending at 1,120.76; and the Nasdaq composite closed down 101.47, or 4.09%, at 2,381.05. All numbers are preliminary.
Stocks briefly pared losses Wednesday afternoon after Bank of America CEO Brian T. Moynihan said he is comfortable with the company's capital.
The Dow rose 4% and S&P 500 4.7% on Tuesday as the Federal Reserve said it would keep borrowing costs at an all-time low and was prepared to use a range of tools to bolster the economy. That gain pared a 6.7% slide in the S&P 500 on Monday when markets opened following the reduction in the U.S. credit rating by Standard & Poor's to AA+ from AAA.
The S&P 500 has fallen 16% from this year's high on April 29.
Stocks fell across the globe Wednesday as the benchmark STOXX Europe 600 index lost 3.8% to 223.50, prompted by concern about higher costs to protect the government debt of Greece, Italy, Spain and France. A gauge of European banks tumbled 6.7%.
“European banks are putting pressure on stocks,” Peter Jankovskis, who helps manage about $2.6 billion at Oakbrook Investments, said in a telephone interview. “The focus still remains over there, even if it had shifted a bit to the debt-ceiling concern in the U.S. It's not a concern that the banks are going out of business. It's just a concern that the cost of operation is going up. We've been watching financial stocks getting killed over here.”
Treasuries rose, pushing yields on two- and 10-year notes toward record lows reached Tuesday. Gold rallied to a record $1,800 an ounce. The Chicago Board Options Exchange Volatility Index soared 16% to 40.62, after tumbling 27% Tuesday.