Dow down on European debt worries; two-day fall of 285 points

NEW YORK -- The stock market extended its slide Wednesday after investors couldn't shake their concerns about European countries' big debt loads.

The Dow Jones industrial average ended with a loss of 60 points to put its two-day drop at 285 points. The Dow halved its loss by the close but finished off its highs.

Treasury prices rose and pushed down interest rates in the bond market for a second day.

A drop in the euro and a rise in the dollar continued to ram markets around the world. The stronger dollar hurts U.S. stocks by cutting into profits of U.S. companies that do business abroad. A higher dollar also hurts commodity prices by reducing demand from foreign buyers.

Investors are concerned that a $144 billion aid package for Greece won't be adequate to keep debt problems in Europe from spreading. There were also questions about whether the bailout would amount to more than a short-term fix for Greece, which has the smallest economy in the European Union.

German Chancellor Angela Merkel on Wednesday encouraged lawmakers in Berlin to rush the approval of Germany's $29.3 billion share of the Greek rescue program by Friday. Analysts say delays could bring more upheaval to global markets.

Investors fear that if a tourniquet for Greece's financial problems doesn't hold, it would be harder to help larger countries like Spain and Portugal that also face big deficits. Moody's Investors Service warned on Wednesday that it could cut Portugal's credit rating two notches in the next three months.

Adam Gould, senior portfolio manager at Direxion Funds in New York, said the lack of clarity about what will happen in Europe is keeping investors from wanting to buy dips in the market the way they have for most of the market's 14-month recovery.

"This is really a story that has the market spooked," he said. "First it was Greece. Now it's Spain and Portugal."

Fixing Greece's financial problems won't be easy. Riots erupted in Athens on Wednesday over tax hikes and government spending cuts that the International Monetary Fund and other European nations are requiring as part of the bailout. Tens of thousands of people took to the streets and three people were killed in the protests.

The problems of heavy government debts are a big test for the euro. Sixteen countries use the common currency. The euro fell against the dollar, hitting its lowest level in 14 months in morning trading.

Swings in global stock markets have intensified in the past week. Wednesday was the sixth time in seven days the Dow moved by more than 100 points. Investors have questions about Greece but they're also awaiting the government's April jobs report on Friday and monitoring Washington's overhaul of the rules that govern financial companies.

According to preliminary calculations, the Dow fell 59.94, or 0.6 percent, to 10,866.83. It had been up as much as 20 points and down nearly 112 points.

The Dow is down 2.6 percent in two days, its steepest back-to-back drop in three months.

The broader Standard & Poor's 500 index fell 9.42, or 0.8 percent, to 1,164.18, while the Nasdaq composite index fell 24.14, or 1 percent, to 2,400.11.

Bond prices rose. The yield on the benchmark 10-year Treasury note fell to 3.56 percent from 3.60 percent late Tuesday.

Gold rose. Crude oil fell $2.77 to $79.97 per barrel on the New York Mercantile Exchange.

Kevin Mahn, chief investment officer at Hennion & Walsh in Parsippany, N.J., said the debt problems are severe but not new. He said investors had been looking for an excuse to sell stocks after the market's steep 14-month climb. Mahn expects the big back-and-forth moves will continue.

"I think it's going to be more of an extended pause than a correction," Mahn said.

The drop in commodity prices hurt energy and materials stocks. Retailers also fell ahead of April revenue reports on Thursday.

Occidental Petroleum Corp. fell $3.66, or 4.2 percent, to $82.88, while Best Buy Co. fell $1.65, or 3.7 percent, to $42.90.

Investors looking for continued signs of a domestic recovery received another encouraging sign on employment Wednesday. Payroll company ADP said private employers added 32,000 jobs last month. That was slightly above expectations.

The ADP report is seen an early indicator of the government's closely watched monthly employment report, though there are often wide variations because the ADP only accounts for private-sector jobs.

The Labor Department is expected to report on Friday that the unemployment rate was unchanged at 9.7 percent last month while employers added 200,000 jobs. Unemployment is considered the main obstacle to a sustained recovery of the U.S. economy.

A trade group said that services industries expanded in April at a slower pace than economists expected. The Institute for Supply Management said its service sector index was unchanged at 55.4 in April from March. Analysts expected an increase. Still, a reading above 50 indicates growth.

About four stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.5 billion shares, in line with Tuesday.

The Russell 2000 index of smaller companies fell 11.12, or 1.6 percent, to 698.58.

Britain's FTSE 100 fell 1.3 percent, Germany's DAX index dropped 0.8 percent, and France's CAC-40 fell 1.4 percent. In Greece, the main stock index fell 3.9 percent. Portugal's PSI 20 lost 1.5 percent and Spain's main index fell 2.2 percent.