By Matthew Craft, The Associated Press
NEW YORK — Stocks and the euro fell Wednesday as worries about Europe hang over financial markets. Energy companies fell hard as the price of crude oil plunged 4 percent. The dollar and Treasury prices rose as traders shifted money into lower-risk investments.
Italy's borrowing rates ratcheted higher and the euro slid below $1.30 for the first time since January, two signs that the debt crisis continues to pressure Europe's governments. The euro has lost more than 3 percent in three days.
Italy had to pay higher borrowing rates in its last bond auction of the year Wednesday. The euro zone's third-largest economy paid 6.47 percent interest to borrow euro3 billion ($3.95 billion) for five years, up from 6.30 percent just a month ago. The higher rates make it more expensive for Italy to borrow money and reflect weakening confidence by investors in the country's ability to repay its debts.
According to preliminary calculations, the Dow Jones industrial average fell 131.46 points, or 1.1 percent, to 11,823.48
The market appears to be in "sell now and ask questions later mode," said John Canally, investment strategist at LPL Financial. The fear that another bank failure will lead to a wider financial crisis like Lehman Brothers did in 2008 overshadows everything else, he said.
In traders' minds, a slight drop in the euro or a small rise in Italian government bond yields is seen as a step toward a banking collapse. "Just the hint of bad news becomes 'Oh my gosh. The world is going to end,' " Canally said.
The Standard & Poor's 500 index fell 13.91, or 1.13 percent, to 1,211.82. The Nasdaq fell 39.96 points, or 1.55 percent to 2,539.31.
The yield on the 10-year Treasury note fell to 1.92 percent from 1.96 percent late Tuesday as demand increased for ultrasafe assets. The dollar also rose against other currencies. The euro lost about out penny against the dollar to $1.29.
European markets fell broadly, and the losses accelerated in the last hour of trading. Germany's DAX dropped 1.7 percent; France's main stock index fell 3.3 percent.
Energy stocks led the market lower after the price of crude oil plunged $4 to $96 a barrel. Schlumberger Ltd. lost 3.8 percent; Apache Corp. fell 4.3 percent and Cabot Oil & Gas Corp. fell 5.4 percent.