US STOCKS-Wall Street tumbles on euro-zone fears

* Global stocks drop

* 3-month dollar Libor at highest level since July

* Fears mount over euro-zone banking system

* Indexes off: Dow 2 pct, S&P 2 pct, Nasdaq 2.2 pct

* For up-to-the-minute market news see [STXNEWS/US]
(Adds bank stock in fourth paragraph)

By Edward Krudy

NEW YORK, May 25 (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) tumbled about 2
percent on Tuesday, tracking a sell-off in global equities, on
worries over Europe’s banking sector and as short-term funding
costs soared.

European markets were on edge after three-month dollar
Libor rates rose to their highest level since July as banks
became more wary of lending to European institutions after the
Spanish government’s rescue of a local bank over the weekend.

The euro fell (Read more about the trembling euro. ) to an 8-1/2-year low against the yen and
neared a 4-year trough versus the dollar, while safe-haven U.S.
Treasuries rallied. For details, see [ID:nN25123032]

Big banks and industrial stocks tumbled on fears that
Europe’s debt crisis might derail a global economic recovery.
Caterpillar Inc (CAT.N: ) fell 3.4 percent to $57.20, and Bank of
America Corp (BAC.N: ) fell 3 percent to $14.95.

Chevron Corp (CVX.N: ) was off 2.7 percent to $71.42 as oil
futures were caught up in a commodities sell-off, falling 3
percent to just above $68 per barrel.

“The contagion has really dragged our markets down, I think
somewhat excessive from where we are in the crisis. It’s become
more of a panic,” said Marc Pado, U.S. market strategist at
Cantor Fitzgerald & Co in San Francisco. “The impact on the
U.S. economy is getting a bit overplayed here.”

The Dow Jones industrial average (.DJI: ) dropped 198.00
points, or 1.97 percent, to 9,868.57. The Standard & Poor’s 500
Index (.SPX: ) fell 21.20 points, or 1.97 percent, to 1,052.45.
The Nasdaq Composite Index (.IXIC: ) lost 48.35 points, or 2.18
percent, to 2,165.20.

North Korea’s threat of military action against the South
helped send local shares to a 15-week closing low as the
government in Seoul convened an emergency session, rattling
investors around the globe. The threats followed the sinking of
a South Korean warship, allegedly by the North, in March.

The S&P 500, a broad gauge of big-cap U.S. stocks (Read more about the stock market today. ), briefly
fell below February’s intraday bottom of 1,044.50, reaching its
lowest point since early November 2009.

The index is down about 14 percent since late April. Some
traders said they were looking for a 20 percent correction,
which would mark a technical bear market.

In one bright spot, U.S. consumer confidence rose for the
third straight month in May to the highest in more than two
years. But that was countered by a report showing single-family
home prices dropping in the first quarter on renewed price
pressure as federal aid faded away. [ID:nN25273385] and


To access Reuters Insider analysis on sell-off, click


Stock Market Analysis

(Reporting by Edward Krudy; editing by Jeffrey Benkoe)

US STOCKS-Wall Street tumbles on euro-zone fears