Worries about the soundness of a European bank pushed US stocks lower Thursday and sent global investors hunting for less risky assets.
The Dow Jones Industrial Average was down 105 points, or 0.6 percent, to 16,880 as of 11:49 a.m. Eastern time. Earlier, though, the blue-chip index had tumbled as much as 180 points on worrisome news out of Europe about accounting irregularities at a Portuguese bank.
The Standard & Poor’s 500 Index lost 11 points, or 0.6 percent, to 1,961 and the Nasdaq composite fell 31 points, or 0.7 percent, to 4,387.
Concerns emerged overnight about the financial stability of a Portuguese bank. Espirito Santo Financial Group was forced to suspend trading in its shares Thursday due to accounting irregularities at Espirito Santo International, its largest shareholder. Espirito Santo Financial Group is, in turn, the largest shareholder in Banco Espirito Santo, Portugal’s largest bank.
The bank’s share price fell sharply and is an unwelcome relapse for investors. Portugal just concluded its three-year international bailout program in May. Portugal needed a 78 billion euro rescue in 2011 during the eurozone’s debt crisis.
The Dow closed above 17,000 for the first time just a week ago. With stocks trading near those all-time highs, investors argue that even a small hiccup in the global economy is going to upset the market.
“When you’re priced to perfection, anything less than perfection is going to disappoint,” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
Major stock indexes tumbled in Germany and France. Both the DAX in Frankfurt and the CAC-40 in Paris slumped 1.3 percent. Spain’s IBEX lost 2 percent and the Euro Stoxx 50 Index, the European equivalent of the Dow, was down 1.5 percent.
Investors retreated into their traditional havens in times of market turmoil: U.S. government bonds and gold. The yield on the U.S. 10-year note dropped to 2.51 percent from 2.55 percent late Wednesday. Gold rose $17.30, or 1.3 percent, to $1,341.50 an ounce.
In a bit of good news in the US, applications for unemployment benefits sank last week. The Labor Department said weekly applications for unemployment benefits dropped to 304,000. The four-week average, a less volatile measure, dipped 3,500 to 311,500, the second-lowest reading since August 2007.