EUROPE SPOOKS MARKETS

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NEW YORK (CNNMoney) — U.S. stocks fell Thursday, after European Central Bank President Mario Draghi wouldn’t commit to doing as much as investors hoped to help prop up troubled eurozone countries and emphasized “substantial downside risks” for the European economy.

The Dow Jones industrial average (INDU) dropped 126 points, or 1%. The SP 500 (SPX) fell 17 points, or 1.3%. The Nasdaq (COMP) slid 23 points, or 0.8%. The SP and Nasdaq are both back in negative territory for the year.

The declines once again reinforce the belief among investors that what happens in Europe does not stay in Europe.

U.S. Treasury Secretary Tim Geithner is in Europe all week to meet with top government officials, highlighting the growing concern in Washington about the eurozone debt crisis.

Financial stocks were among the biggest drags on the broader market. Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), Goldman Sachs (GS, Fortune 500), Morgan Stanley (MS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) were all down between 3% and 6%.

“The ECB took positive steps today,” said Uri Landesman, president of the hedge fund Platinum Partners. “Then this genius comes out and puts a damper on the whole thing. Why bother?”

The European Central Bank cut its key interest rate by a quarter-percentage point Thursday morning, to 1%. The central bank was widely expected to cut its rates by up to 0.5%, as the risk of a broad recession in Europe continues to rise.

Europe’s mission ‘hardly’ accomplished

Draghi dashed hopes — at least in the near-term — that the ECB would be likely to extend its reach to buy bonds of troubled European nations including Spain, Italy, and Portugal. Investors became spooked by his rhetoric, which seemed to some as a retraction of earlier indications that he might be amendable to bond buying.

Several traders said that today many investors are simply positioning themselves ahead of what could be a make-or-break meeting among EU leaders to decide whether the countries will agree to closer political and economic coordination.

“Tomorrow could be one of the most important days in global markets,” said Landesman. “Nobody is insulated from the European Union.”

U.S. stocks ended mostly higher Wednesday, as investors bet that European leaders will produce a meaningful solution to the debt crisis. But trading has been choppy this week, amid a flurry of rumors about what the politicians may or may not announce after the summit.

Economy: The U.S. government reported Thursday that the number of people filing for initial unemployment benefits fell to a 9-month low of 381,000 in the latest week.

The news initially boosted markets, as jobless claims for the week ending December 3 were expected to hit 395,000, according to a survey of analysts by Briefing.com.

Wholesale inventories for the month of October came in higher-than-expected at 1.6%. Economists had predicted an 0.2% increase, after contracting by 0.1% the month prior.

Meanwhile, the U.S. trade deficit for October due out later today is expected to hit $44.0 billion, up from $43.1 billion in September.

World markets: European stocks traded down in the afternoon. Britain’s FTSE 100 (UKX) edged down 0.60%, the DAX (DAX) in Germany fell 1.81% and France’s CAC 40 (CAC40) moved down 2.13%.

Asian markets ended lower. The Shanghai Composite (SHCOMP) fell 0.1%, the Hang Seng (HSI) in Hong Kong dropped 0.7% and Japan’s Nikkei (N225) fell 0.7%

Companies: Shares of Ford (F, Fortune 500) declined after the automaker announced a surprise quarterly dividend of 5 cents a share.

After weeks of speculation about how more than a billion dollars in customer money went missing at MF Global, former CEO Jon Corzine gave his side of the story on Capitol Hill Thursday.

“I simply do not know where the money is, or why the accounts have not been reconciled to date,” Corzine said in a prepared statement to Congress. “I sincerely apologize, both personally and on behalf of the company, to our customers, our employees and our investors, who are bearing the brunt of the impact of the firm’s bankruptcy.”

Shares of discount retailer Costco (COST, Fortune 500) dropped after the company released quarterly results before the opening bell Thursday that missed analysts’ expectations. The company reported earnings of 73 cents a share. Analysts surveyed by Thomson Reuters expected earnings of 80 cents a share.

Meat producer Smithfield Foods (SFD, Fortune 500) shares fell despite beating analysts’ expectations, posting earnings of 76 cents a share.

Currencies and commodities: The dollar gained strength against the euro, the British pound and Japanese yen.

Oil for December delivery fell $1.75 to $98.92 a barrel.

Gold futures for February delivery dropped $29.60 to $1,715.20 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury was little changed, with the yield holding steady at 2.02% from late Wednesday. To top of page

Article source: http://rss.cnn.com/~r/rss/money_topstories/~3/rl1Y3rrVwwA/index.htm

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