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Saturday, September 10, 2011

Deepening fears about Europe sink stocks (ext.)

NEW YORK (CNNMoney) -- Stocks ended sharply lower Friday, as bad news out of Europe kept piling up. The sell-off triggered the sixth weekly decline in seven weeks for the Dow and S&P 500.

Just before the opening bell, the European Central Bank announced that executive board member J?rgen Stark was stepping down. Analysts say Stark is leaving amid disagreements over the ECB's bond-buying program.

The ECB has been buying bonds issued by troubled European governments in an attempt to stabilize volatile sovereign debt markets, but the program has been criticized for overstepping the ECB's sole mandate to maintain price stability.

Selling gained momentum in the afternoon as investors also grew increasingly concerned about a possible Greek default.

The Dow Jones industrial average (INDU) tumbled 304 points, or 2.7%. At its lowest points, the blue chip index was down 359 points.

The S&P 500 (SPX) slumped 32 points, or 2.7%, and the Nasdaq composite (COMP) lost 71 points, or 61 points, or 2.4%.
Reports said Germany is preparing to shore up its banks to protect them against a Greek default. If Greece's bonds become worthless, that can trigger capital-requirement problems, and a lot of major banks could go under, Saluzzi said.

"The financial contagion could be pretty bad, so investors are getting out now and waiting to see how all of this will shake out," he added.

"A big part of the European debt crisis has been the lack of coherent response from European officials," said Kathy Jones, fixed income strategist at Charles Schwab. "It always seems like they're behind the curve, with too little too late, and all the changes in leadership in the middle of a crisis increases the uncertainty."

Stocks in Europe took a dive following the news and ended sharply lower. Britain's FTSE (FTSE) 100 shed 2.4%, the DAX (DAX) in Germany slipped 4.1% and France's CAC (CAC) 40 fell 3.2%.

Investors also digested President Obama's stimulus plan, in which he promises to boost hiring and provide a jolt to the stalled economy, if it becomes law. Mixing $253 billion in tax cuts and $194 billion in new spending, the total bill for the plan is $447 billion.

"We know what's been promised, and the size of it is encouraging. But the big question is whether or not it will get passed, and what that process will look like," said Jones. "Nobody wants to relive this summer's debate over the debt ceiling."

Investors also continued to mull over also Federal Reserve Chairman Ben Bernanke's speech delivered Thursday afternoon. Stocks ended sharply lower Thursday, as investors signaled disappointment that the Fed chief didn't offer any new solutions to the nation's economic slowdown.

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