Market Recap: Skyrocketing Italian Borrowing Costs Lead to Massive Sell-Off

Markets closed down on Wall Street today: Dow -3.20%, S&P -3.67%, Nasdaq -3.88%, Oil -0.80%, Gold -1.65%.

On the commodities front, Oil (NYSE:USO) fell to $96.03 a barrel. Precious metals were also down, with Gold (NYSE:GLD) falling to $1,769.50 an ounce while Silver (NYSE:SLV) fell 3.27% to settle at $34.01.

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Today’s markets were down because:

1) Italy. Stocks sold off sharply right out of the gate this morning as Italy’s borrowing costs rocketed past the 7% level that drove Greece, Ireland, and Portugal to seek bailouts. The sell-off only intensified in the afternoon amid reports that European Union officials had no plans to rescue Italy, the euro zone’s third-largest economy. The news not only led to a slump in U.S. markets, but European markets as well, while the euro fell more than 2% against the dollar.

2) Greece. After Prime Minister George Papandreou announced plans to step down over the weekend, handing over the reins to a unity government tasked with pushing through austerity measures required to secure bailout funds, the world turned its eyes instead to Italy, though apparently a bit too soon. It was all but settled earlier today that that House Speaker Filippos Petsalnikos would head Greece’s new coalition government, only for it to emerge hours later that  there was no successor due to feuding between the two main political parties. And unless the new government, which has yet to take shape, can push through budget reforms to secure emergency funding from the European Union and International Monetary Fund, Greece will run out of money next month and default on its debt.

3) Banks. Bank stocks were among the biggest losers in today’s market sell-off, with Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), and Morgan Stanley down more than 6%. JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC) shares fell more than 4%.

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