NEW YORK — Stocks weakened Wednesday, ending a five-day advance in the S&P 500 index, as new signs of strain emerged in the European banking system. The euro fell to its lowest level against the dollar in nearly a year, and Treasurys rallied.
The Dow Jones industrial average lost nearly 140 points. The Standard & Poor’s 500 is now negative for the year again, after barely turning positive Friday.
The European Central Bank said banks had parked $590.72 billion with it overnight, surpassing the record set only Monday. That means European banks were less willing to take the risk of making short-term loans to one another, opting instead to earn low interest rates from the ECB. The disclosure also hurt the euro, which fell to $1.291, its lowest level against the dollar since January.
The worrying news from the ECB overshadowed two successful auctions of Italian government debt. Italy was able to pay much lower borrowing rates than last month. Investors’ strong demand raised hopes that Italy would be able to avoid sinking into a financial crisis, as smaller countries such as Greece and Portugal have.
John Merrill, chief investment officer at Tanglewood Wealth Management, said markets would remain vulnerable to flare-ups in Europe’s long-running financial crisis until leaders there come up with more convincing solutions for paying down their enormous debt loads and keeping the 17-nation currency union intact.
“We live in a Band-Aid world,” Merrill said. “Nobody really is addressing underlying issues.”
The Dow Jones industrial average fell 139.94 points, or 1.1 percent, to 12,151.41. Materials and energy companies led the declines. Alcoa fell 3 percent, and Caterpillar fell 2.4 percent.
The S&P 500 fell 15.79 points, or 1.3 percent, to 1,249.64. The Nasdaq composite declined 35.22 points, or 1.3 percent, to 2,589.98.
The yield on the 10-year Treasury note fell to 1.93 percent from 2 percent late Tuesday as investors moved money into less risky assets.
The Bank of Italy raised $11.8 billion in two bond auctions, reflecting investor approval of the country’s recently passed austerity measures. The yield on Italy’s six-month bill offering was half the interest rate the country paid in a similar auction last month. The yield on the country’s 10-year bond remained dangerously high, however, at 6.93 percent. It had risen to 7 percent Tuesday, a level that is considered unsustainable.
