With no concrete action in Europe, stocks slump
(AP) NEW YORK - The European Central Bank on Thursday laid out some of its game plan for tackling the continent's debt crisis, but markets wanted much more.
Stock indexes sank across the U.S. and Europe, the euro fell against the dollar and investors dumped bonds issued by the governments of Spain and Italy. Hopes had been high that the ECB would announce more immediate steps, considering the ECB president's pledge last week to do "whatever it takes" to keep the euro intact.
It was the second day in a row markets were disappointed by a lack of decisive action from a major central bank. On Wednesday, indexes closed lower after the Federal Reserve made only vague promises about its plans for reviving the U.S. economy.
"It's more jawboning, it's more copy and paste from last week," Kenny Polcari, managing director of the brokerage ICAP, said. "There was no definitive plan, and so all the hype and energy (Draghi) created last week is going to go down in flames today."
The Dow Jones industrial average fell 92 points to close at 12,879. The Standard & Poor's 500 index sank 10 points to 1,365. The Nasdaq composite index lost 10 points to end at 2,910. It was the fourth day in a row of losses; U.S. stocks haven't risen since the promise by ECB President Mario Draghi last week.
Draghi did commit his central bank to more action Thursday, saying it would make a new effort to buy government bonds to drive down borrowing costs for countries like Spain and Italy.
Investors thought the plan was short on detail. Draghi said that policymakers would work out more specifics in the coming weeks. Even with the lack of details, the ECB's willingness to buy more bonds sends a clear message: Europe's financial crisis is getting worse.
The yield, or interest rate, on Spain's benchmark 10-year bond jumped to 7.06 percent from 6.68 percent late Wednesday. The yield on Italy's 10-year bond rose to 6.29 percent from 5.85 percent. The 7 percent rate is a crucial flash point, because that's the rate at which other countries have found themselves unable to pay their bills.
To be fair, the ECB faces a Herculean task with no easy solutions. Whatever it does is sure to offend someone, and skeptics doubt that it has any weapons left in its arsenal that could make a big difference. Some of the weaker countries in Europe, like Greece, have been resistant to the spending cuts the ECB has tried to impose as part of a solution.
In the U.S., General Motors and Kellogg reported lower quarterly profits, which they attributed partly to Europe.
In other trading:
-Knight Capital Group, the trading firm that took the blame for a technical glitch that sent trading of dozens of stocks into chaos early Wednesday, lost more than half its market value. Knight's stock plunged $4.36 to $2.58, down nearly 63 percent on the day. Knight said it would suffer a $440 million loss because of the trading problems.
-Abercrombie & Fitch dropped 15 percent and Aeropostale dropped 33 percent after both companies pre-announcing weak second-quarter sales. Abercrombie lost $4.96 to $29.06. Aeropostale lost $6.37 to $13.08.
-Bristol-Myers Squibb, the drug company, fell 8.6 percent after suspending a study of a potential hepatitis C treatment, citing patient safety issues. The stock lost $3.05 to $32.55.
-There were some positive signs about the economy but they got lost in the stronger maelstrom. Retailers including Target, Limited Brands and Gap announced that July sales had beat expectations. Shares of all three companies were up in early trading. Gap rose the most, climbing 9 percent, or $2.60, to $32.02.
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