Wall Street plummets as investors dump equities

Dow Jones: 11,401.01 (–108.08) Nasdaq: 2,612.83 (–9.48) SP 500: 1,204.09 (–11.92)US STOCKS fell yesterday, following the longest rally since July for the Standard and Poor's 500 Index, amid concern that Greece's debt crisis is worsening.

Stocks pared losses after Greece said discussions with European officials about the country’s financial bailout were productive.

International lenders told Greece yesterday it must shrink its public sector and improve tax collection to avoid default within weeks as investors, unnerved by political setbacks in Europe dumped risky euro zone assets.

Bank of America and JPMorgan Chase slid at least 2.6 per cent, following a slump in European lenders.

Exxon Mobil and Alcoa fell more than 1.1 per cent, pacing losses in energy and raw material producers.

Hewlett-Packard dropped 2.8 per cent as companies most dependent on economic growth tumbled.

“The only story that matters is Europe,” Jack Ablin, chief investment officer for Chicago-based Harris Private Bank, which oversees $55 billion, said.

“Central banks can provide liquidity, but they can’t solve structural imbalances. I have an uncomfortable level of cash, but there are very few tranquil places to hide,” he said.

The SP 500 has lost as much as 18 per cent since April 29th on concern Europe’s crisis would threaten the global economy.

Greece said a conference call between Minister of Finance Evangelos Venizelos and high representatives of the European Central Bank, European Commission and International Monetary Fund was “productive and substantive”.

It said the call, in which officials judged whether Greece is eligible for an aid payment due next month and on track for a second rescue package, will resume today.

“The markets are saying the odds are very high of a Greek default,” Frederic Dickson, who helps oversee $28 billion as chief market strategist at DA Davidson in Lake Oswego, Oregon, said.

“In addition, people are expecting a lot from the Fed this week” which leaves room for disappointment,” he said.

Fed officials may propose new measures to galvanise the economy when the Federal Open Market Committee completes a two-day meeting on September 21st. – (Bloomberg/Reuters)