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NEW YORK (AP) - Back to reality for the stock market -- and back
down.


      Wall Street focused Wednesday on the bleak landscape ahead for
the economy and sold off, wiping out the big gains from a day
earlier and then some. The Dow Jones industrial average closed down
519 points.


      The selling was intensified by worries about debt problems in
Europe.

      On Tuesday, the Federal Reserve said it planned to keep interest
rates ultra-low for two more years. After some initial confusion,
the stock market staged a huge comeback and had one of its best
days.

      But the interest-rate news proved to be a distraction. The Fed
made the pledge because it sees almost no chance that the economy
will improve substantially by 2013, and when investors focused on
that, they dumped stocks again.

      "Now it gets back to the fundamentals," said Mark Lamkin,
founder of Lamkin Wealth Management, which manages $215 million.


      The Dow closed at 10,719.94, down 4.6 percent for the day. By
points, it was the ninth-steepest decline for the market. The Dow
has now lost more than 2,000 points in less than three weeks.

      Wednesday was another day marked by big moves. The Dow was down
more than 300 points within minutes of the opening bell. It
recovered some of that loss, then drifted steadily lower in the
last two hours.

      The market has traded that way for two weeks, lurching up and
down. The most extreme example was Tuesday, when the Dow swung more
than 600 points in the one hour and 45 minutes after the Fed's
statement.

      The stomach-churning highs and lows are reminiscent of the fall
of 2008, the depths of the financial crisis, when swings of 800 or
even 1,000 points in day were not unheard of.
     


 The S&P 500 finished the day down 4.4 percent and the Nasdaq
composite index down 4.1 percent.

      Financial stocks led the market lower. Bank of America and
Citigroup each lost more than 10 percent of their market value.
Wall Street is worried because it doesn't know how badly American
banks might be hurt by Europe's debt problems.
     


 Investors fear Italy and Spain will be the next countries unable
to repay their debts. The European financial system has been
battered by fears about banks holding bonds of heavily indebted
countries such as Greece and Portugal.

      "It's the same game of Old Maid playing out in Europe that was
played out here during the subprime mortgage crisis," said Quincy
Krosby, an economist and market strategist with Prudential
Financial.

      The fear is that if European governments default on their bonds,
it will hurt the European banks that own them. That could start a
chain reaction that hurts the United States, because large U.S.
banks own European bank debt.

      Europe is also a big market for U.S. companies. It accounted for
about 29 percent of foreign sales for S&P 500 companies last year.
     


 France came under pressure Wednesday amid concerns that it could
become the next country to lose its top AAA rating. The cost of
insuring against a default of French government debt hit a record,
according to data from Markit.
     


 In Asia, the concern is that higher inflation in China could
lead to slower growth. China, Brazil and other less-developed
countries have provided the strongest economic growth since the
world began to recover from recession in 2009.
     


 Gold rose above $1,800 per ounce for the first time as more
money poured into investments considered safe at a volatile time
for the financial markets. Gold closed up about $41 at $1,784.
    


  The 10-year Treasury note, which has also served as a haven,
also rose sharply. Its yield fell to 2.11 percent from 2.26 percent
late Tuesday. It had reached a record low of 2.03 percent on
Tuesday. A bond's yield falls when its price rises.


      Investors have bought U.S. government debt even after S&P
stripped the United States of its top credit rating, AAA, late last
week.

      AP Business Writers Bernard Condon, Matthew Craft, Sarah
DiLorenzo and Daniel Wagner contributed to this report.

Gallery

Business and Economic News

Back to reality for the stock market -- and back
down.


      Wall Street focused Wednesday on the bleak landscape ahead for
the economy and sold off, wiping out the big gains from a day
earlier and then some. The Dow Jones industrial average closed down
519 points.

Stocks resume sell-off; Dow finishes down 519

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