(CBS/AP) NEW YORK - The stock market suffered its worst loss in a month Wednesday after a weak bond auction in Spain caused fears about Europe's debt problems to flare again. Gold plunged to its lowest level since January.
The Dow Jones Industrial Average was down as much as 179 points, but recovered later in the trading day to close down 125 at 13,075. The Dow has fallen more than 100 points only one day this year, March 6, when it lost 204 points.
The Standard & Poor's 500 index finished down 14 at 1,399. The technology-heavy Nasdaq composite index fell 45 to 3,068, its worst decline of the year. It was the Nasdaq's sixth loss in seven days.
European stocks plunged. Benchmark indexes fell 2.8 percent in Germany, 2.7 percent in France, and 2.3 percent in Britain. The global sell-off was caused by a disappointing auction of government debt in Spain. Bond yields there shot higher, a signal that investor confidence in Spain's finances is weakening. Spain announced tax increases and budget cuts last week.
"European countries face a lot of tough choices, and investors are watching the situation there carefully," said John Manley, chief equity strategist for Wells Fargo Advantage Funds. "It's like when cockroaches appear: You're never quite sure how many are out there."
Investors looking for safe places to park money drove prices for U.S. government debt higher. The dollar surged against the euro, and crude oil fell more than $2.50 a barrel.
Commodity prices also fell sharply. Gold plunged $57.90, or 3.5 percent, to $1,614.10 an ounce. Many investors hold gold as a hedge against a weakening dollar, and the dollar strengthened Wednesday against the euro and the British pound.
The euro fell as low as $1.3106, its lowest point against the dollar in more than two weeks. It traded at $1.3217 late Tuesday.
Gold doubled in price after the 2008 financial crisis and almost hit $1,900 an ounce, driven partly by fear about the global economy and partly by investors who saw an opportunity to make money from gold's strong rally. Silver fell more than 6 percent Wednesday, and copper fell 3 percent. The price of crude oil fell $2.54 per barrel to $101.47, its first close below $102 since mid-February.
In the United States, minutes from the last meeting of the Federal Reserve showed that members had a sunnier view of the economy because of strong gains in the job market in December, January and February.
Payroll processor ADP said the economy added 209,000 private-sector jobs in March. Economists think the government's monthly unemployment report on Friday will show a gain of 210,000 for March. Job growth averaged 245,000 from December through February.
But the Fed also signaled that it is unlikely to buy more bonds to help the economy. The Fed has embarked on two rounds of bond-buying in the last several years, most recently in August 2010, to lower interest rates and help stock prices.
"Despite the relatively strong run we've had in the U.S., there's a number of headwinds out there, the main one being Europe," said Bernie Kavanagh, vice president portfolio management at the investment firm Stifel Financial.
Traders sold European bonds and bought safer investments such as German bunds and U.S. Treasurys. The yield on the 10-year Treasury note fell to 2.24 percent from 2.29 percent late Tuesday.
Bank stocks, which typically decline when the European debt crisis flares, dropped sharply. Citigroup dropped almost 3.7 percent, Morgan Stanley fell 3.2 percent, JPMorgan Chase 2.4 percent. and Bank of America 2.5 percent.
The stocks of materials and mining companies fell. Newmont Mining was down 4.9 percent, while Freeport-McMoran Copper fell 2 percent. Aluminum maker Alcoa Inc. fell 2.4 percent, one of the biggest declines in the Dow.