The Dow plunged more than 300 points Friday as fears of a Greek default gripped the market, sending investors to the sidelines.
The Dow Jones Industrial Average ($INDU) was down 334 points, or 3%, at 10,960. The S&P 500 ($INX) was down 35 points, or 2.9%, at 1,151, and the Nasdaq ($COMPX) was off 71 points, or 2.8%, at 2,458.
A high-level defection at the European Central Bank and reports that German banks were preparing for a Greek default send stocks plunging. Jurgen Stark resigned from the ECB’s Executive Board, citing personal reasons. He had reportedly disagreed with the central bank’s decision to buy bonds to help debt-laden eurozone countries.
Bloomberg reported earlier that German was preparing to support its banks if the next installment of Greece’s bailout is denied, forcing the country to default on its debt.
”Greece is falling apart again, an important member of the European Central Bank has resigned, several banks are in free-fall or halted, and no one really seems to have a plan for dealing with these issues. It is a classic case of too much uncertainty, and that is sending folks to the sidelines,” said RealMoney contributor Rev Shark in a blog post.
Amid renewed worries about the tenuous state of the eurozone economy, the euro was falling 1.7% against the greenback, which was gaining 1.2%. European markets closed steeply lower with the FTSE in London down by 2.4%, and the DAX in Frankfurt off by 4%.
Leaders from Europe’s leading economies are convening Friday to discuss the faltering global economy in the wake of the financial crisis and credit crunch.
On Thursday, U.S. stocks lost about 1% as Federal Reserve chairman Ben Bernanke failed to reveal any new plans to help the economy through monetary easing. Major U.S. indices have closed in the red four out of the first five trading days of September and the Dow is down 2.7% so far this month.
“The market has not fared well over the weekend for the past few months, causing many to follow that trend and liquidate short-term positions on Friday,” wrote Marc Pado, U.S. market strategist at Cantor Fitzgerald.
Concerns about Greece overshadowed the president’s newly announced plan to create jobs. In a Thursday speech to Congress, President Barack Obama announced a $447 billion stimulus package, a much more ambitious proposal than the $300 billion plan that had been expected. Tax cuts, which make up more than half of the proposed plan, are expected to garner support from Republicans, while the payroll-tax holiday component is expected to meet opposition in Congress.