Wall Street plummets on euro zone uncertainty

Dow Jones:11,657.96 (–297.05) Nasdaq:2,606.96 (–77.45) S&P 500:1,218.28 (–35.02)

US STOCKS tumbled yesterday after investors were blind-sided by a surprise call for a Greek referendum on an EU bailout plan, casting doubt on the sustainability of the recent market rally.

The S&P 500 has slid more than 5 per cent so far this week in moves reminiscent of the market swings seen over the past two months and after investors thought the worst of the euro zone debt crisis was over.

The speedy pullback comes after stocks rebounded to post their best month in 20 years in October. The gains were fuelled by hope for an eventual deal to rescue Greece, finally agreed upon at last week’s European Union summit.

The Dow Jones industrial average fell 297.05 points, or 2.48 per cent, at 11,657.96.

The Standard & Poor’s 500 Index lost 35.02 points, or 2.79 per cent, at 1,218.28.

The Nasdaq Composite Index dropped 77.45 points, or 2.89 per cent, at 2,606.96.

“The fact that we gave it back as quick as we did in two days is very concerning,” said Ari Wald, an analyst at Brown Brothers Harriman.

Analysts said if Greek voters reject the unpopular bailout in a vote proposed by Greek premier George Papandreou, it would likely result in a “hard default” by Greece, causing bigger losses for banks and raising the threat of systemic risk.

The news slammed European stocks, particularly the region’s banks, which slumped 6 per cent.

US banks were also hit hard. Morgan Stanley, which investors worry has heavy exposure to Europe, fell 8 per cent to $16.23.

Citigroup dropped 7.7 per cent to $29.17.

General Electric retreated 4.1 per cent to $16.02.

Exxon Mobil slumped 2.8 per cent to $75.94.

Baker Hughes tumbled 7.7 per cent to $53.54. The oilfield contractor reported third-quarter earnings excluding some items of $1.18 a share, missing the average analyst estimate by 3 per cent, according to Bloomberg.

Indexes swung sharply as successive European law makers lined up behind the bailout package but returned to close near session lows after a Greek government spokesman said the prime minister told his cabinet the referendum would go ahead. – (Reuters/Bloomberg)