NEW YORK — Trouble on two fronts in the European debt crisis sent U.S. stocks tumbling Wednesday to their biggest loss since the summer’s rocky trading swings. The Dow Jones industrial average fell almost 400 points.
Stocks were down from the opening bell after borrowing costs in Italy spiked to dangerous levels, a sign that investors are losing faith in Rome’s ability to repay its national debt.
“Italy is potentially too big to bail out, but that’s the problem,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. “It’s spiraling out, and the question is now, how do you fix it?”
In Greece, meanwhile, power-sharing talks aimed at avoiding a default broke down.
The Italian economy is more than six times larger than that of Greece, which so far has been the center of the continent’s debt problem. American investors are worried that the consequences from Europe could include a freeze in lending, the disintegration of the euro currency or a bruising recession that also would impact the U.S.
They sold stocks as a result. The Dow finished down 389.24 points to 11,780.94.
“The market loves a quick solution, and we’re obviously not getting one,” said Mark Lehmann, director of equities of JMP Securities.
The slide in stocks was broad: Only a single stock in the Standard & Poor’s 500 — Best Buy — finished higher for the day. Financial companies were among the hardest hit because they would suffer first if Europe’s debt problem spins out of control.
The S&P 500 closed down 46.82 points to 1,229.10. The S&P, the broadest major stock index, declined 3.7 percent, its worst day since Aug. 18.
Over the summer, swings of 3 percent or 4 percent a day for the stock market were common. Investors were focused on a debt showdown in Washington and fears of a second recession.
Lately, Europe has pushed everything else to the back burner, and the volatility has continued. The Dow fell 276 points on Oct. 31 and 297 points the next day, both because of instability in Europe. It rose 100 or more three of the next five days.
The Nasdaq composite finished Wednesday down 105.84, or 3.9 percent, to 2,621.65.
European stock markets fell sharply too. The main stock index in Italy finished the day down 3.8 percent. The DAX in Germany and CAC-40 in France each declined 2.2 percent.
“It’s just like a scary movie, as it never ends,” said Keith Wirtz, chief investment officer at Fifth Third Asset Management in Cincinnati. “The overarching problem is that most of the economies in Europe can’t sustain the size of their governments. We’re going to have this headache for a long time.”
