Wave of selling pounds US stocks

NEW YORK (AP) – Another wave of selling pounded the stock market Wednesday after a rising euro did little to curb fears that Europe has no quick fix for its debt crisis.

The Dow fell 66.58, or 0.63 percent, to 10,444.37.

The S&P 500 index fell 3.77, or 0.3 percent, to 1,117.03. At its low Wednesday, the index was down 9.8 percent from its 2010 trading high.

The Nasdaq composite index fell 12.61, or 0.5 percent, to 2,304.65.

The Dow Jones industrial average fell about 65 points in afternoon trading. The Standard & Poor’s 500 index, widely considered one of the best measures of how the stock market is doing, neared a 10-percent drop from the 2010 trading high it reached last month. That would mark the first time the market has had what’s known as a “correction” since it bounced off a 12-year low in March last year. Most analysts say a correction is a drop of at least 10 percent.

The extent of investors’ worries about Europe was clear. The euro’s moves have been driving trading for weeks but stocks continued to slide even after the 16-nation currency rose from a four-year low.

The latest worry came from Germany, where regulators banned certain kinds of trading known as “short-selling.” Short selling is when investors bet that a stock or other investment will fall. Germany is banning what’s called naked short selling, in which traders are betting against investments they don’t hold. The ban covers European government bonds, credit default swaps and the shares of several financial companies.

The sudden announcement late Tuesday from Germany’s financial regulator was seen in the markets as another example of disarray in Europe’s financial system. Analysts said the hasty move only deepened the uncertainty about what steps governments might take next in hopes of containing the selling. Major European stock markets tumbled nearly three percent.

Maury Fertig, chief investment officer at Relative Value Partners, in Northbrook, Ill., said memories of the stock market’s crash in late 2008 and early 2009 are still raw and that traders don’t want to be caught in a market slide.

“It’s shoot first, ask questions later,” Fertig said. “The freshness of the pain of 2008 is still really stuck in investors’ minds.”

Germany enacted the short-selling rule in hopes of curtailing sudden swings in European debt markets, like the ones that crippled Greece’s ability to borrow money after the rates on its bonds shot higher earlier this year.

European leaders agreed last week to a nearly $1 trillion bailout program to help countries like Greece that face mounting debt problems. The deal was initially embraced by financial markets, but traders quickly became concerned that the austerity measures tied to the rescue package would upend a rebound.

“People are still just very concerned about what’s going on overseas,” said Sam Stovall, chief investment strategist in U.S. equity research at Standard & Poor’s.