New York: Commodity-related stocks drove Wall Street lower on Wednesday as stiff declines in energy and metals prices underscored investor concerns about global economic weakness and Europe's raging debt crisis.
A sharp 7 percent dive in the price of copper, seen as a leading indicator for the economy, rattled investors and led to a drop of 4.5 percent in the S&P materials index Freeport-McMoRan Copper & Gold Inc fell 7.3 percent to USD 32.29.
Investors were on a knife edge as inspectors from the EU and IMF headed to Greece to scrutinize austerity plans while German Chancellor Angela Merkel worked to defuse a revolt within her government ahead of a vote to expand Europe's bailout fund on Thursday.
Wednesday's declines put the S&P 500 on course for its worst quarter since the high noon of the financial crisis in the fourth quarter of 2008.
The drop also illustrates how sensitive the market has become to news on Europe's troubles. "There is certainly a lot of headline risk and a lot of weak hands that hold stocks after this big rally we've had in the last three days," said Robert Francello, head of equity trading for Apex Capital, a hedge fund in San Francisco.
"Traders who have either gotten long during the rally or covered their shorts are probably going just to flatten themselves out, either taking profits or getting out of the market," he said.
Brent crude resumed its downward trend, falling more than USD 3 in afternoon trade, sending an S&P index of energy stocks .GSPE down 3 percent. Chevron fell 1.9 percent to USD 91.74. News early in the afternoon that bans on short-selling stocks in France, Italy and Spain have been extended highlighted the regulatory risk faced by investors and increased selling pressure.
The Dow Jones industrial average dropped 179.79 points, or 1.61 percent, to 11,010.90. The Standard & Poor's 500 Index dropped 24.32 points, or 2.07 percent, to 1,151.06. The Nasdaq Composite Index dropped 55.25 points, or 2.17 percent, to 2,491.58.
Traders said volume would likely be light and market movements accentuated during the rest of the quarter due to the Jewish New Year holiday of Rosh Hashanah. So far, the S&P 500 has fallen 12.8 percent this quarter, its worst decline since the fourth quarter of 2008 when it fell 22.6 percent.