By CHIP CUTTER
NEW YORK – So much for a comeback in the stock market.
Stocks fell sharply Wednesday as investors became increasingly concerned about the worsening debt crisis in Greece. The dollar rose against the euro and U.S. government bond prices climbed as investors sought out safer assets.
In morning trading, the Dow Jones industrial average fell 84 points, or 0.7 percent, to 11,991, giving up much of its 123-point gain the day before.
The Standard & Poor’s 500 index fell 8, or 0.6 percent, to 1,280. The Nasdaq composite index fell 12, or 0.5 percent, to 2,666.
Thousands of people gathered on the streets of Athens to protest government cutbacks required to avoid a default on the government’s debt. Demonstrators hurled rocks at riot police, who responded with tear gas.
In the latest sign of how Greece’s problems could affect other countries, credit ratings agency Moody’s said it may downgrade its ratings of France’s three largest banks because of their exposure to Greek debt.
Greece’s fiscal problems appeared to be solved a year ago with a package of emergency loans, but it became clear this spring that the country would need more help from its European neighbors to avoid a default. On Monday, Standard & Poor’s slashed Greece’s creditworthiness to the bottom of the 131 states that have ratings.
Worries about Greece have contributed to a drop in U.S. stocks since late April. If Greece defaults on its debt, it would cause borrowing costs for other debt-ridden European countries like Spain and Portugal to soar as investors shun their debt. That could slow economic growth across the continent and throughout the rest of the world.
A Greek default could also put pressure on U.S. companies that do much of their business overseas. U.S. corporations have benefited from a weak dollar, which has made their exports more competitive in global markets.
The yield on the 10-year Treasury note, which moves opposite its price, fell to 3.05 percent from 3.10 percent late Tuesday. That signaled a greater demand for low-risk investments.
The Dow jumped above 12,000 on Tuesday, and all three major stock indexes had their best day so far in June. Analysts said investors should expect stock trading to be volatile as uncertainty about the economy persists.
The housing market remains weak and the jobs market is sluggish. Questions loom about whether lawmakers will support raising the nation’s borrowing limit by an Aug. 2 deadline. The Federal Reserve’s $600 billion bond-buying program is also winding down at the end of June. The program was designed to keep interest rates low to encourage borrowing.
“The markets are nervous, investors are nervous, and so we expect volatility,” said Oliver Pursche, president of Gary Goldberg Financial Services.
The Dow and the S&P 500 are both down 5 percent this month, while the Nasdaq is down 6 percent.
Pandora Media Inc. jumped 41 percent to $22.61 on its first day of trading. The Internet radio company priced its initial public offering at $16 a share, the high end of its range, reflecting hot demand for online companies. Professional networking site LinkedIn soared on its first day of trading last month, but has since fallen 19 percent.
Owens-Illinois Inc. fell 8 percent after the glass container company cut its second-quarter earnings outlook because it is facing higher manufacturing and delivery costs.
A service of YellowBrix, Inc.