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Dow hit by fears over sovereign debt

THE Dow briefly fell below the crucial 10,000 mark yesterday as stocks suffered their worst losses in more than nine months.

Escalating sovereign debt problems in Europe and an unexpected rise in jobless claims put investors on the defensive just ahead of Friday’s crucial payrolls report.

Investors dumped banks and commodity-related shares and Wall Street’s fear gauge jumped more than 20 per cent, fuelling worries that the brief respite from the market’s late January slide was over.

“We got spoiled last year with the market going up almost non-stop after the March low,” Bob Doll, global chief investment officer for equities at BlackRock, told Reuters.

He added: “The consolidation or corrective phase is probably not over.”

Worries over the ability of Greece, Portugal and Spain to pay their debts fuelled a flight from stocks to the safe-haven US dollar, which hurt commodity prices denominated in the greenback.

The unexpected increase in US weekly initial claims for state unemployment benefits pointed to stubborn weakness in the labor market, and heightened concerns ahead of Friday’s employment data.

The Dow Jones industrial average fell 268.37 points, or 2.61 per cent, to close at 10,002.18.

The Standard & Poor’s 500 Index dropped 34.17 points, or 3.11 per cent, to close at 1,063.11.

The Nasdaq Composite Index lost 65.48 points, or 2.99 per cent, to close at 2,125.43.

The Dow is now off 6.7 per cent from its 15-month closing high of 19 January.

The S&P 500 is off 7.6 per cent from its 15-month closing high on the same date, while the Nasdaq is off 8.4 per cent from its 16-month closing peak set on 19 January.

Spain and Portugal were the latest eurozone countries to worry investors about mounting fiscal deficits after Greece had rattled markets earlier.

Reflecting investor anxiety, the CBOE Volatility Index, Wall Street’s favourite measure of sentiment, spiked 20.7 per cent to end at 26.08.

Bank of America was the Dow’s biggest percentage decliner, down 5 per cent at $14.75. Aluminum company Alcoa fell 4.3 per cent to $12.91.