Dow plunges below 10,000 as Wall St. slide goes on

NEW YORK [CHECK THE MARKETS: Get the latest numbers from Wall Street]

The Dow fell more than 250 points in the minutes after the opening bell and spent most of the day under 10,000. It recovered somewhat and was down about 80 in late afternoon. The average has fallen nearly 12 percent in the past month.

Besides the financial crisis in Europe, investors were reminded that political issues, such as tension between North and South Korea, can threaten economic growth. Analysts said the unresolved Gulf of Mexico oil spill contributed to the foul mood.

But uncertainty over how Europe's debt problems will affect the rest of the world in the coming months remains the biggest source of investor pessimism, said Jonathan Corpina, president of Meridian Equity Partners.

The largest concern is that austerity measures that European governments are being forced to take could lead to a prolonged economic slump in the region and cause another global recession. He said investors fear that even those measures won't be enough.

"It seems like the Europeans are playing 'tag, you're it' -- first it was Greece, and now it's maybe Spain or Portugal," said Corpina, a New York Stock Exchange floor trader. "We know someone else is next. The problem is that it seems like every plan in place isn't going to satisfy the needs."

Britain's Queen Elizabeth opened Parliament with a warning of hard times, saying in a speech on behalf of Britain's new government that there would be budget cuts because "the first priority is to reduce the deficit and restore economic growth."

Other European countries are imposing budget cuts as well, trying to control their debt. Investors are concerned that these steps will stifle economic growth, and that the growth of other countries, including the U.S., will inevitably be stunted.

European Union leaders warned Tuesday that the continent's economy would stagnate unless governments make major reforms to promote growth. The problem is that large debts in some countries make it difficult to implement stimulus measures to rally economies.

The stock market turned so pessimistic in recent weeks that it doesn't take much to send the market several hundred points lower. Although it managed a comeback late Tuesday, no one believed the market's turbulence was over.

The Dow fell 78.97, or 0.8 percent, to 9,987.82 by mid-afternoon. The Dow's lowest close of the year so far was 9,908.39, on Feb. 8.

The Standard & Poor's 500-stock index fell 5.38, or 0.5 percent, to 1,068.27. The index hit its lowest level of the year in early trading, dropping to 1,040.78. The Nasdaq composite index fell 11.24, or 0.5 percent, to 2,202.31.

Investors also fled from the euro and commodities including oil, and again sought safety in government bonds. That drove interest rates lower. The benchmark 10-year note's yield fell to its lowest level since April 2009.

The market's continuing slide, with frequent triple-digit drops in the Dow, recalls the unrelenting selling of the 2008 financial crash -- and begs the question of what can halt the plunge.

Jim Dunigan, managing executive of investments for PNC Wealth Management, said good news about jobs or corporate earnings could stabilize stocks by signaling that a U.S. recovery is intact.

The government's monthly jobs report in less than two weeks is expected to show that employers are ramping up hiring further. And companies will soon start giving hints about profits for the quarter that ends in June.

"You could derail growth in Europe and not derail growth in the United States, but people don't necessary use a lot of logic when they're headed to the exits," Dunigan said.

Investors want to see less uncertainty before the selling pressure eases, said Dan Seiver, a finance professor at San Diego State University.

"It may be that the market has a little further to go before we hit the bottom," he said. "I could see it going as low as 9,000." He noted that "whenever people are running around and shouting, that's usually a good time to buy for those with the stomach for it."

For now, traders are unswayed by upbeat U.S. economic news. They ignored a better-than-expected report Tuesday showing consumer confidence index rose for the third straight month.

Investors are ignoring current signs of growth and trying to gauge what shape the global economy will be in later this year.

"Market participants feel like they're walking on eggshells," said Oliver Pursche, executive vice president at Gary Goldberg Financial Services in Suffern, N.Y. "Every small piece of potentially bad news is being exaggerated and mentally being fast-forwarded to the worst-case scenario."

The markets were also hurt by reports that North Korean leader Kim Jong Il had ordered his military to combat alert because of rising tensions on the Korean peninsula.

North Korea also said it would cease communication and relations with Seoul. South Korea has said North Korea was responsible for the sinking of a South Korean warship two months ago. Major indexes in Japan and Hong Kong fell more than 3 percent.

Meanwhile, the monthlong effort to cap the BP oil well that has spewed millions of gallons of oil into the Gulf of Mexico is also rattling investors, Corpina said. Oil is coming ashore across a 150-mile swath of the Gulf Coast, endangering wildlife and livelihoods in commercial fishing and tourism.

"The worry is that the situation is getting worse and there's no real fix," he said. "First we were just talking about the oil industry being affected. Now it's the environment and fishing industries. Next we'll be talking about the hotel and leisure industries."

A disappointing report on home prices added to the downcast mood. The Standard & Poor's/Case-Shiller 20-city home price index fell 0.5 percent in March from February, a sign the housing market remains weak even with mortgage rates near historic lows.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.17 percent from 3.20 percent late Monday. It fell as low as 3.07 percent, its lowest level since April 2009.

The yield on the 30-year bond briefly fell below 4 percent for the first time since October, before rising slightly. It is down to 4.07 percent from 4.08 percent late Monday.

Crude oil fell $1.06 to $69.16 a barrel on the New York Mercantile Exchange, in part a reflection of expectations that weak economic growth will curtail demand for fuel.

Overseas markets were also down sharply. Britain's FTSE 100 dropped 2.5 percent, Germany's DAX index lost 2.3 percent, and France's CAC-40 plummeted 2.9 percent. Japan's Nikkei stock average fell 3.1 percent. Hong Kong's Hang Seng fell 3.3 percent.