U.S. stocks plunged Friday, erasing the week’s gains, as rising fears about fallout from Europe’s debt crisis overshadowed President Barack Obama’s plan to revive the U.S. job market.
The resignation of a key official from the European Central Bank was the latest sign of deepening disagreement over how to solve Europe’ economic problems. And investors have to wonder whether the president’s jobs plan can pass through a divided Congress.
At 12:20 p.m. Eastern time, the Dow Jones industrial average fell 298 points, or 2.6 percent, to 10,998. The S&P 500 index dropped 31, or 2.6 percent, to 1,155. The Nasdaq composite index skidded 60 points, or 2.4 percent, to 2,469.
All three indexes are lower for the week. The Dow is down more than 2 percent. It has fallen in five of the past six weeks, and four of the past five trading sessions.
Juergen Stark, the top economist at the ECB, resigned shortly after the market opened. He was an advocate for higher interest rates. Published reports said he left because he opposed the bank’s extensive purchases of debt issued by heavily-indebted member nations.
Stark’s resignation came as financial leaders from the world’s most developed economies are meeting in France to hash out plans for reviving the struggling global economy.
On Thursday evening, President Obama unveiled a $447 billion package of tax cuts and new spending aimed at boosting hiring. He spent much of the speech challenging Congress to put aside political theatrics and pass the bill.
It’s not clear whether that can happen. Republicans control the House and many of them oppose any new spending. Some reacted by calling the plan a rehash of failed strategies.
Friday’s plunge continues a tough quarter for stock markets. Fears about the spreading debt crisis in Europe and the slowing global economy have encouraged traders to sell shares and make bets seen as less risky.
The S&P 500 is down 10 percent since the third quarter started in July. However, it has recovered almost 6 percent since its lowest close this year on Aug. 8.
Analysts said shares are likely to keep falling because conditions in Europe show little sign of improving. If Europe’s economy contracts, U.S. companies will likely be hurt. Half of their revenue comes from overseas, and half of that is from Europe, said Sam Stovall, chief investment strategist with Standard & Poor’s in New York.
“Maybe the market has already priced in a very, very soft spot, but it has not priced in quicksand — it has not priced in a recession,” he said.
Stovall said recent data make another U.S. recession appear more likely.
The government reported at 10 a.m. that sales for wholesale businesses were flat in July. It was the worst result since May.
Jittery investors have snapped up investments seen as safe, sending Treasury yields to historic lows. The yield on the 10-year Treasury note plunged to 1.95 percent Friday from 2.02 percent earlier in the day. On Monday, the 10-year yield fell to 1.91 percent, the lowest since the Federal Reserve Bank of St. Louis began keeping daily records in 1962.
Markets in Europe skidded lower after the news from the ECB. France’s CAC 40 and Germany’s Dax fell about 4 percent. London’s FTSE lost more than 2.
McDonald’s Corp. shares fell after the company said a key revenue metric missed analysts’ expectations. McDonald’s said that revenue at restaurants open at least 13 months rose 3.5 percent in August. Analysts had expected a 4.9 percent increase.
Shares of Bank of America Corp. fell nearly 3 percent after The Wall Street Journal that it might cut up to 14 percent of its workforce as part of a massive restructuring. Bank of America already has cut at least 6,000 jobs this year. CEO Brian Moynihan announced a management shake-up this week.
Copyright 2011 The Associated Press.