May 7, 2010
By Michael P. Regan and Rita Nazareth
May 7 (Bloomberg) — Global stocks tumbled, while Treasuries rallied after Europe’s debt crisis spurred a market rout yesterday that undermined confidence in financial trading mechanisms. Oil slid 1.5 percent to lead commodities lower.
The Standard & Poor’s 500 Index fell as much as 3 percent before paring losses to 0.8 percent as of 11:22 a.m. in New York. The MSCI World Index sank 1.7 percent and the Stoxx Europe 600 Index plunged 3.2 percent. The 10-year Treasury note’s yield slipped two basis points to 3.41 percent. Greece led a drop in bonds of debt-laden nations, with the 10-year yield premium demanded to own the securities instead of benchmark German bunds rising to a record of more than 9 percentage points.
Regulators are reviewing a plunge that briefly wiped out more than $1 trillion in market value yesterday as the Dow Jones Industrial Average slid almost 1,000 points before paring losses. The New York Stock Exchange switched from electronic matching to auctions during the slide, encouraging some sell orders to flow to smaller exchanges that had few if any buyers. Concern over the integrity of trading systems today overshadowed government data showing the biggest jobs growth in four years.
“It’s a confidence crisis,” said Quincy Krosby, chief market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees about $667 billion. “You’ve got yourself in a vortex of negativity in Europe. In the U.S., the investigation on yesterday’s trading is definitely an overhang. It’s a very precarious scenario. The market is waiting for a viable solution.”
Stocks have been pummeled the last two weeks amid concern European leaders won’t do enough to keep the most indebted nations from defaulting after a 110 billion-euro ($140 billion) rescue package for Greece failed to halt a rise in government borrowing costs. The Stoxx 600 has tumbled 12 percent from its high for the year last month.