Stocks fall on higher European borrowing costs

U.S. stocks fell on Friday after worries about Europe returned, erasing almost half of the market’s gain from the previous day.

Shortly after midday the Dow Jones industrial average was down 84 points at 12,902. It had jumped 181 points the day before.

The broader Standard & Poor’s 500 index fell 12 points to 1,376. The Nasdaq composite fell 34 points to 3,022.

Investors had several reasons to wonder about the prospects for global economic growth. Higher borrowing costs in Europe suggested that the continent’s debt problems aren’t over. Growth slowed in China, and a closely watched gauge of consumer confidence came in weaker than analysts were expecting.

Friday’s drop is “all about Europe,” said Peter Cardillo, chief market economist at Rockwell Global Capital. He thinks investors are worried that Europe’s economic problems will be bigger than previously expected, although he doesn’t share that view. Europe needs to growth to fix its debt problems, but higher borrowing costs could force more cuts in government spending.

“You can’t have growth if you have too much austerity. I think that’s what the fear is,” Cardillo said.

European markets fell broadly. France and Germany’s stock indexes each fell 2.4 percent. The FTSE 100 index in Britain fell 1 percent.

The yield on Spain’s 10-year government bond rose to 5.93 percent, and Italy’s rose to 5.52 percent. That’s a sign that investors’ confidence in those countries’ finances slipped and that the countries will have to pay more to borrow money.

New data showed the Chinese economy grew at an 8.1 percent pace in the January-March period, the slowest in almost three years.

Also Friday, the U.S. government reported that inflation was mild in March outside of volatile food and gas prices.

The stock declines were broad. Only utilities and consumer staples stocks rose among the 10 market sectors tracked by the S&P 500 index. Both are considered refuges when investors fear a weakening economy or turbulence in financial markets.

Financial stocks declined the most, 1.7 percent. Bank of America Corp. fell almost 4 percent. Wells Fargo & Co. and JPMorgan Chase & Co. both reported better-than-expected profits, but each fell more than 2 percent as investors focused on comments that said the overhang from bad loans would continue.

Among stocks making big moves:

— Google fell 3 percent after the company said it would issue new non-voting stock to shareholders.

— Coinstar, which runs the Redbox DVD rental kiosks, rose 9 percent after it raised its revenue forecast.

— Dow Chemical rose 1.8 percent after it raised its quarterly dividend 28 percent. The company said last week it would eliminate 900 jobs and close several plants.

In the U.S., the dollar and Treasury prices rose.

Commodity prices fell. Oil dropped 48 cents to $103.16 per barrel. Metals fell, and corn dropped 1.5 percent and wheat dropped almost 3 percent.