US STOCKS-Wall St tumbles on euro-zone fears, reform woes

* Euro-zone turmoil feeds fear of market correction

* Senate votes to end debate on financial reform bill

* U.S. weekly initial jobless claims disappoint

* Dow off 3.6 pct, S&P down 3.9 pct, Nasdaq off 4.1 pct

* For up-to-the-minute market news see [STXNEWS/US]
(Updates to close)

By Leah Schnurr

NEW YORK, May 20 (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) sank nearly 4
percent on Thursday on growing fears the euro zone’s efforts
to tackle its sovereign debt crisis will fall short,
jeopardizing the global economic recovery.

Selling picked up speed late in the day and indexes closed
around their session lows after the U.S. Senate voted to end
debate on the sweeping overhaul of financial regulation,
allowing a final vote on the bill later on Thursday or Friday.
For details, see [ID:nN20244272]

The S&P 500 finished down 12 percent from its April 23,
2010, closing high, signaling a correction and marking the
worst day since late April 2009. The index also ended below
its 200-day moving average, a sign the momentum downward could
build.

The correction comes on the back of a stream of negative
news out of Europe, from worries over Greece’s debt crisis to
Germany’s unilateral decision this week to ban naked
short-selling.

Banks and commodity-related stocks, which are more
sensitive to economic cycles, were among the hardest hit, with
the KBW Bank index (.BKX: ) sliding 5.1 percent. The S&P Energy
index (.GSPE: ) fell 4.4 percent, while U.S. June oil futures
fell 2.7 percent, or $1.86, to settle at $68.01 a barrel in
volatile trade on the day of its expiry.

“The primary mover is coming from Europe. There are still
fears of a debt crisis over there and the fact that it could
spread to the banking system,” said Bernie McSherry, NYSE
trader at Cuttone & Co in New York.

The Dow Jones industrial average (.DJI: ) dropped 376.36
points, or 3.60 percent, to 10,068.01. The Standard & Poor’s
500 Index (.SPX: ) slid 43.46 points, or 3.90 percent, to
1,071.59. The Nasdaq Composite Index (.IXIC: ) lost 94.36
points, or 4.11 percent, to 2,204.01.

May individual equity options and some options on stock
indexes will stop trading at Friday’s close and expire on
Saturday, which may increase volatility.

The Chicago Board Options Exchange Volatility index
(.VIX: ), Wall Street’s so-called fear gauge, surged 31.3
percent earlier to 46.37, its highest intraday level in more
than a year. But the VIX pared back slightly to end up 29.6
percent at 45.79.

In a sign of heightened fear, 2.5 million puts have traded
across all the exchange traded funds, which is three times the
normal and about 51 percent of the total put volume.

Disappointing economic data on the domestic front also
contributed to the downdraft. The number of U.S. workers
filing new applications for unemployment benefits unexpectedly
rose last week for the first time since early April.
[ID:nN20125298]

The index of leading economic indicators slipped last
month for the first time since March 2009, while factory
activity in the U.S. mid-Atlantic region accelerated less than
expected in May.

Large manufacturers’ shares ranked among the heaviest
weights on the Dow, with Caterpillar (CAT.N: ) down 4.5 percent
at $58.67 and 3M (MMM.N: ) falling 3.5 percent to $79.62.

Uncertainty surrounding the final outcome of the financial
reform bill weighed on financial shares and hindered the
market overall, McSherry said.

“Put it all together and there’s a whiff of fear back in
the air. Hopefully, it doesn’t metastasize and get worse.”

Analysts said the correction could be healthy for a market
that surged as much as 80 percent from the March 9, 2009,
closing low. But if worries over the recovery’s sustainability
persist, it will be difficult for stocks to bounce back.

Money

(Reporting by Leah Schnurr; Editing by Jan Paschal)

US STOCKS-Wall St tumbles on euro-zone fears, reform woes