NEW YORK — Investors uneasy about the news coming out of Europe went back to selling stocks Tuesday, sending markets lower. The falling euro and news that German regulators plan to limit some kinds of short selling fed the drop.
The Dow Jones industrial average closed down almost 115 points after giving up an early gain of 93. The Dow and broader indexes lost more than 1 percent.
The euro gave stocks a boost early in the day when European Union countries sent bailout money to Greece. The move raised confidence about Europe’s ability to prevent its debt crisis from spreading to other economies, including the U.S.
By afternoon, though, the upbeat mood faded and the euro fell. That sapped the stock market’s strength. Treasury prices rose after demand for safer investments increased.
The Dow fell 114.88, or 1.1 percent, to 10,510.95. It has fallen on three of the past four days.
The Standard & Poor’s 500 index fell 16.14, or 1.4 percent, to 1,120.80, while the Nasdaq composite index fell 36.97, or 1.6 percent, to 2,317.26.
The euro, the currency shared by 16 European nations, has been driving stock trading for weeks as investors interpreted its slide as a sign of continuing economic problems in Europe. It hit a new four-year low of $1.2160 on Tuesday.
Meanwhile, Germany said it is banning “naked” short selling, which occurs when traders bet on a stock or investment that they don’t own. The ban covers government debt certificates and shares of several financial companies. The government said it was imposing the rule in hopes of keeping the financial markets stable.
Investors anxious about Europe’s problems were further rattled by Germany’s move. Naked short selling was cited as one of the factors in world markets’ turbulence during the 2008 financial crisis. The latest step brought reminders of the desperation that U.S. regulators signaled in trying to stabilize the market and underscored a fear that a further drop in the euro will continue to pound world markets.
“If Europe really slows, the threat would be that it could take down the rest of the global economy,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland. He noted, however, that most economic numbers don’t suggest that a recovery is stalling.
McCain said long-term investors should gather more evidence before making big changes to their portfolios.
Major stock indexes are down about 8 percent from their 2010 highs in late April. That puts the market close to the threshold for a correction, usually defined as a drop of 10 percent to 20 percent.
