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Lack of ECB bond-buying plan sends stocks lower
Denial of bond-buying plan from European Central Bank sends stocks and euro lower
By The Associated Press

NEW YORK (AP) ' U.S. stocks are sliding Thursday after the head of the European Central Bank said there was no existing plan for large-scale government bond purchases, as many in the markets had hoped.

ECB President Mario Draghi's remarks sent borrowing costs for Italy, Spain and other countries with heavy debt burdens sharply higher. European stock indexes fell and the euro weakened against the dollar. Draghi was speaking after the central bank cut its benchmark interest rate and took other modest steps to help shore up Europe's financial system.

The Dow Jones industrial average fell 109 points, or 0.9 percent, to 12,086 as of 11:10 a.m. Eastern. JPMorgan Chase & Co. slid 2.4 percent, the most of the 30 large companies in the Dow. Bank of America dropped 1.5 percent. If the Dow closes lower, it will break a three-day run of modest gains.



"The market is reacting to a breakdown in what was supposed to be the solution to the European problems," says Richard Bove, bank analyst at Rochdale Securities. He believes the fears are overblown. "They're worried about this unknown, undefined, unquantifiable contagion risk that is somehow going to hit the banks."

The Standard & Poor's 500 index fell 15, or 1.2 percent, to 1,245. The Nasdaq lost 24, or 0.9 percent, to 2,625.

In France, French President Nicolas Sarkozy and German Chancellor Angela Merkel tried to muster support from other European leaders for their latest bid to save the euro currency from collapsing under the weight of huge government debts. A summit that begins later Thursday has been billed as a make-or-break moment to convince markets that Europe will take bold enough action to prevent the euro from breaking up.

The yield on the benchmark 10-year Italian government bond jumped a quarter of a percentage point, a large move, to 6.12 percent as investors sold the bonds following Draghi's remarks. The yield on Spain's 10-year bond rose one-third of a percentage point to 5.71 percent.

Traders sent yields on Italian government bonds above 7 percent last month, a level at which weaker countries like Greece and Portugal were forced to seek relief from their lenders. When borrowing costs jump too high, it threatens a government's ability to pay off existing debts and could ultimately lead a government to default.

Markets had interpreted recent remarks by Draghi to mean that the ECB would step in to buy government bonds if nobody else would. His comments Thursday dampened those expectations. Large-scale purchases of European government bonds by the ECB would send borrowing rates for indebted European countries sharply lower and ease strains on Europe's financial system.

Among companies making large moves, Costco Wholesale Co. fell 2.5 percent after reporting earnings that fell short of analysts' expectations. The retailer said higher costs ate up much of a 12.5 percent increase in sales.

Amgen rose 1.5 percent after it said it plans to spend about $5 billion on buying back its stock from investors. The drugmaker expects to acquire more than 9 percent of its outstanding stock.

DemandTec Inc. jumped 55 percent on news that International Business Machines Corp. plans to buy the software company for $440 million in cash. DemandTec's software helps businesses set prices for products they sell.

MEMC Electronic Materials Inc. jumped 2.1 percent. The solar energy company said it would eliminate 20 percent of its workforce and cut other costs.

The stock market's drop came despite new figures showing that the number of people applying for unemployment benefits fell last week to the lowest level in nine months.

Hope that European leaders would resolve the crisis and signs that the US would avoid falling into another recession has pushed the Dow up 14 percent since it hit a low for the year Oct. 3.


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