NEW YORK — Fearing a financial rupture in Europe, investors around the world fled from risk Wednesday. They punished stocks and the euro, and the yield on a benchmark U.S. bond hit its lowest point since World War II.
In the United States, where concerns about Europe have already wiped out most of this year’s gains for stocks, major averages fell more than 1 percent. The Dow Jones industrial average closed down 161 points.
With Spain’s banking system teetering and Greece’s political future unclear ahead of crucial elections next month, European stocks lost even more. The euro dropped below $1.24, to its lowest point since the summer of 2010.
“Everyone’s just afraid that if Europe doesn’t get its act together, there will be a big spillover in the U.S.,” said Peter Tchir, manager of hedge fund TF Market Advisors.
He said the uncertainty over Europe’s future was reminiscent of the financial crisis in the fall of 2008, when it was briefly unclear whether banks would be bailed out and “we had these giant swings up and down.”
Wall Street, which woke up to increased anxiety over higher Spanish borrowing rates, was down from the opening bell.
The Dow closed down 160.83 points, or 1.3 percent, at 12,419.86. The Dow has had a miserable May, losing more than 6 percent, and is on track for its first losing month since September.
The Standard & Poor’s 500 index lost 19.10 points to 1,313.32. The Nasdaq composite fell 33.63 to 2,837.36. Energy stocks were hit hardest because of a big drop in the price of oil, but stocks in all major industries fell.
The trigger for Wednesday’s sell-off was Spain, where the banking system is under strain a week after its fourth-largest bank required $23.6 billion in government aid to cover souring real-estate loans.
Food and energy commodities fell sharply. Crude oil lost more than $3 to below $88 a barrel. Crude has been falling steadily since the beginning of May, when it traded as high as $106 a barrel.
David Kelly of J.P. Morgan Funds said investors should remember that the U.S. is on firmer economic footing than Europe and make sure their portfolios could withstand either possible outcome.
“Things could be much better, or much worse, than the markets have priced in,” Kelly said. “The only logical investment strategy is to be balanced — to get to the middle of the boat.”
