NEW YORK — Stocks plunged around the world Tuesday as fears spread that Europe’s attempt to contain Greece’s debt crisis would fail. The euro fell to its lowest point against the dollar in a year.
The Dow Jones industrial average lost 225 points, its biggest drop in three months. The slide erased a 143-point gain from Monday. The Dow and broader indexes each fell more than 2 percent.
Meanwhile, Treasury prices rose on increased demand for safe investments.
Stocks have seesawed in the past week as European countries’ efforts to agree on a bailout package for Greece proceeded in fits and starts. An agreement finally came together over the weekend, but its ballooning size of $144 billion has investors worried that Europe would have an even tougher time assembling an aid package if a larger country such as Spain or Portugal were to get in trouble.
Traders are concerned that problems in Greece and other countries could spill over to the rest of Europe and, in turn, the U.S.
The market’s plunge wasn’t a surprise to some analysts who have warned for weeks that stocks were due for a retreat. After Monday’s rally, the Standard & Poor’s 500 index was up almost 14 percent from its 2010 low of 1,056.74, reached Feb. 8. Investors have spent the past three months largely shrugging off the problems in Europe and focusing instead on the continuing signs of improvement in the U.S. economy.
The stock drop was a reminder that it doesn’t take much to rattle investors who are on alert for anything that could disrupt the economic recovery.
Tuesday’s slump marked the fifth time in six days that the Dow rose or fell by triple digits. The market’s moves are reminiscent of the fearsome swings in the fall of 2008 and early 2009 when investors were panicked over how bad the recession would get.
“The market has kind of gotten itself into a volatile trading range,” said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York.
The Dow fell 225.06, or 2 percent, to 10,926.77, its lowest close since April 7. The S&P 500 index fell 28.66, or 2.4 percent, to 1,173.60. The Nasdaq composite index fell 74.49, or 3 percent, to 2,424.25.
Anthony Chan, chief economist at J.P. Morgan Private Wealth Management in New York, said Greece’s troubles aren’t enough to spoil a global rebound but that investors are concerned that this small hole in the world economy will become bigger.
“My suspicion is that this won’t end up being large enough to really cause the kind of problems that the market is obsessed with,” he said.
