FILE - In this May 11, 2007, file photo, a Wall Street sign is mounted near the flag-draped facade of the New York Stock Exchange. Corporate earnings season is off to a positive start, helping lift the stock market Wednesday, July 9, 2014, after two days of declines. (AP Photo/Richard Drew, File)
NEW YORK — Stocks fell Thursday as worries about the soundness of a European bank spooked U.S. investors, prompting them to sell off stocks and snap up less risky assets like gold and governments bonds. However, the declines were half of what they were earlier in the session.
KEEPING SCORE: The Dow Jones industrial average was down 73 points, or 0.4 percent, to 16,911 at 2:50 p.m. Eastern time. The blue-chip index had fallen as much as 180 points in the first half hour of trading on news out of Europe about accounting irregularities at a company connected to a major Portuguese bank. That revived fears of another European debt crisis.
The Standard & Poor's 500 index fell eight points, or 0.4 percent, to 1,964 and the Nasdaq composite fell 20 points, or 0.5 percent, to 4,399. Eight out of the 10 industry groups in the S&P 500 index fell, with telecoms and utilities the only industries in positive territory. Those industries are where investors go when they want the safety of steady dividend income.
PORTUGAL QUESTIONS: Worries emerged overnight about the financial stability of a Portuguese bank. The tensions center on Espirito Santo International, a holding company that is the largest shareholder in a group of Espirito Santo family companies, including the parent of Portugal's largest bank, Banco Espirito Santo.
Espirito Santo International reportedly missed a debt payment this week and was cited for accounting irregularities — issues that sparked Europe's debt crisis four years ago. The bank's share price fell sharply and is an unwelcome relapse for investors. Portugal concluded its three-year international bailout program in May.
RESCUE FEARS: Portugal is one of the smaller eurozone economies and, like Greece and Ireland, needed an international rescue in 2011 during the continent's debt crisis. A three-year economic recovery program was supposed to straighten out its finances. Difficulties at Banco Espirito Santo have triggered fears there not everything is resolved in the eurozone.
Portugal needed a 78 billion euro rescue in 2011, one of several nations that required a bailout during the eurozone's debt crisis. The debt crisis in Europe was largely responsible for the U.S. stock market's last correction, a situation when a market falls 10 percent or more. At that time, investors worried the crisis could spread to the U.S. economy, which was starting to recover from its own financial crisis.
THE QUOTE: "Today's news did reignite some of those contagion fears," said Ryan Larson, head of equity trading for RBC Global Asset Management.
PRICED FOR PERFECTION: The Dow closed above 17,000 for the first time just a week ago. With stocks trading near those all-time highs, investors argue that even a small hiccup in the global economy could upset the market.
"When you're priced to perfection, anything less than perfection is going to disappoint," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
EUROPE: Major stock indexes tumbled in Germany and France. The DAX in Frankfurt fell 1.5 percent and the CAC-40 in Paris slumped 1.3 percent. Spain's IBEX lost 2 percent and the Euro Stoxx 50 index, the European equivalent of the Dow, dropped 1.6 percent.
FLIGHT TO SAFETY: Investors retreated into their traditional havens in times of market turmoil: U.S. government bonds and gold. The yield on the U.S. 10-year note dropped to 2.53 percent from 2.55 percent late Wednesday. Gold rose $14, or 1.1 percent, to $1,338.70 an ounce.
JOBS: In a bit of good news in the U.S., applications for unemployment benefits sank last week. The Labor Department said weekly applications for unemployment benefits dropped to 304,000. The four-week average, a less volatile measure, dipped 3,500 to 311,500, the second-lowest reading since August 2007.